ANNUAL REPORT
2023

CONTENTS
PROFILE

1

THE MESSAGE FROM THE PRESIDENT

2

CONSOLIDATED BALANCE SHEETS

8

CONSOLIDATED STATEMENTS OF INCOME

10CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

11

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

12

CONSOLIDATED STATEMENTS OF CASH FLOWS

15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17

INDEPENDENT AUDITOR'S REPORT73

NON-CONSOLIDATED BALANCE SHEETS

82

NON-CONSOLIDATED STATEMENTS OF INCOME

84

NON-CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

85

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

88

INDEPENDENT AUDITOR'S REPORT112

CORPORATE OUTLINE

116

CORPORATE DATA

117

Disclaimer for Forward-Looking Statements:
This document contains forward-looking statements about the performance and management plans of SMCC Group based on available
information and management’s assumptions in light of their experience and perception of historical trends, current conditions, future
developments and other factors they believe appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they
relate to events and depend on circumstances that will occur in the future and various economic and other factors could cause actual results anddevelopments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the
expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to becorrect and you are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of thisdocument.

PROFILE

1

THE MESSAGE FROM THE PRESIDENT

2

II. Management Strategy, Business Environment and Company Issues<Basic management policy and business environment>
The Company is striving to realize a safe and comfortable society based on its
Corporate Principles of “Pursuit of Client Satisfaction,” “Enhancement of Shareholder Value,”“Respect for Employees’ Vitality,” “Social Emphasis,” and “Contribution to Global Environment.”
Structure of Corporate Principles and Management Plan

<Mid-term management strategy and management targets>
In its “Mid-term Management Plan 2022-2024” formulated in March 2022, the Group
has set the theme of “Toward new growth – Realizing a sustainable society” and is undertaking
the specific measures described in the Plan.
However, due to the repeated occurrence of losses in major building construction
projects in Japan, rising prices of building materials, and other factors, a major improvement in
profit levels of building construction projects will be difficult to achieve. For this reason, we haveforecast that profit levels in FY2024, the final year of the Plan, will not reach our initial targets.
Consequently, in May 2023, we formulated a variety of additional measures in responseto the recent significant decline in business performance of the construction business in Japan andundertook a review of our management targets reflecting those measures. We also decided topresent new management targets for the next five years until FY2027, when the effects of thesemeasures are expected to appear.
“Mid-term Management Plan 2022-2024”
Theme: “Toward new growth – Realizing a sustainable society”
By precisely understanding social trends such as the growing worldwide awareness oversustainability and acting accordingly, we will connect them to new growth and the realizationof a sustainable society.
Basic Policy-1
Improve Earning Power(i)Strengthen Ability to Win Orders(ii)
Strengthen On-Site Management

3

4

5

6

Consolidated Financial Statements
Sumitomo Mitsui Construction Co., Ltd.
and Consolidated Subsidiaries
Year ended March 31, 2023
with Independent Auditor’s Report7Mitsui Construction Co., Ltd.
Sumitomo Mitsui Construction Co.,Sumitomo
Ltd.
Consolidated Balance Sheets
and Consolidated Subsidiaries
March 31, 2023
Consolidated Balance Sheets

AssetsCurrent assets:
Cash and deposits (Notes 10 and 11)
Trade notes receivable, accounts receivable on completed
construction contracts and other (Notes 6-(a), 11 and 16)
Inventories (Notes 6-(b) and 6-(f))
Other current assets
Allowance for doubtful receivables
Total current assets

Non-current assets:
Property and equipment, at cost:
Land (Notes 6-(c) and 6-(d))
Buildings and structures (Note 6-(c))
Machinery, equipment and vehicles (Note 6-(c))
Construction in progress
Accumulated depreciation
Property and equipment, net
Intangible fixed assets
Investments and other assets:
Investments in securities (Notes 6-(c), 11 and 12)
Deferred tax assets (Note 15)
Investments in unconsolidated subsidiaries and affiliates
Asset for retirement benefits (Note 14)
Other (Note 6-(c))
Allowance for doubtful receivables
Total investments and other assets
Total non-current assets

Total assets

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)¥65,142¥ 70,974$ 487,845

215,220
30,42527,917(2,299)336,405

197,169
27,882
19,615(1)
315,640

1,611,772
227,851
209,069(17,217)2,519,321

18,97140,847
16,117
1,704(41,163)
36,476

16,316
17,066
39,216370(38,930)
34,040142,072
305,901
120,699
12,761(308,267)
273,167

6,523

6,808

48,85019,300
5,882
758
88
5,581
(863)
30,74773,747

20,954
10,601
817
127
5,976
(891)
37,58478,433

144,536
44,0505,676
659
41,795(6,462)
230,262552,287¥410,153¥394,073$3,071,616

2

8

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Balance Sheets
March 31, 2023

Liabilities and net assets
Current liabilities:
Trade notes payable, accounts payable on construction contracts
and other (Note 11)
Electronically recorded payable (Note 11)
Short-term bank loans and current portion of long-term debt
(Notes 6-(c), 6-(h), 11 and 22)
Lease obligations (Note 22)
Accrued expenses
Income tax payable
Advances received on construction contracts in progress (Notes
6-(g) and 16)
Reserve for defects on completed construction projects
Allowance for losses on construction contracts (Note 6-(f))
Allowance for contingency loss
Other current liabilities
Total current liabilities
Long-term liabilities:
Corporate bond payable (Notes 11 and 21)
Long-term debt (Notes 6-(c), 6-(h), 11 and 22)
Lease obligations (Note 22)
Deferred tax liability on land revaluation (Note 6-(d))
Allowance for share-based payment
Liability for retirement benefits (Note 14)
Other long-term liabilities
Total long-term liabilities
Contingent liabilities (Notes 6-(e) and 18)
Net assets:
Shareholders’ equity:
Capital stock:
Common stock:
Authorized:
533,892,994 shares in 2023 and 2022
Issued and outstanding:
162,673,321 shares in 2023 and 2022
Additional paid-in capital
Retained earnings
Treasury stock, at cost:
6,180,515 shares in 2023 and 6,382,798 shares in 2022
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding loss on securities
Deferred loss on hedging instruments, net of taxes (Note 13)
Land revaluation (Note 6-(d))
Translation adjustments
Retirement benefits liability adjustment (Note 14)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)

¥ 84,771
36,150¥ 89,634
29,347$ 634,846
270,725

10,812
749
8,042
1,349

1,988
781
7,435
3,110

80,9705,609
60,226
10,10235,262514
38,5302,159
25,683244,027

28,635489
19,611
2,159
24,215
207,409

264,075
3,849
288,549
16,168
192,338
1,827,506

10,00063,443
1,814
574
73
17,971
1,110
94,9885,000
57,806
1,889
574
57
18,3893,245
86,96374,889475,121
13,584
4,298
546
134,583
8,312
711,360

12,003

12,00389,889641
56,88685,714－4,800
426,016(3,782)65,748(3,907)
93,811(28,323)
492,383(2,180)
(40)
70
799
(778)
(2,130)7,519
71,137¥410,153

(555)
(92)
70
(1,001)(843)(2,422)
8,313
99,701¥394,073(16,325)
(299)
524
5,983
(5,826)(15,951)
56,309532,741$3,071,616

The accompanying notes are an integral part of these statements.
93

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Income
Sumitomo Mitsui Construction Co., Ltd.
March 31, 2023
and Consolidated Subsidiaries

Consolidated Statements of Income

Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)

Net sales (Notes 7-(a), 16 and 17)
Cost of sales (Notes 7-(b) and 7-(d))
Gross profit
Selling, general and administrative expenses(Notes 7-(c), 7-(d) and 14)
Operating loss
Other income (expenses):
Interest and dividend income
Payments received from insurance claims
Interest expense
Exchange gain, net
Financing related expenses
Litigation related expenses
Commission for loan commitment agreement
Gain on sales of property and equipment (Note 7-(e))
Gain on sales of investments in securities (Note 12-(c))
Impairment loss (Note 7-(g))
Loss on sales and disposal of property and equipment(Note 7-(f))
Other, net
Loss before income taxes
Income taxes (Note 15):
Current
Deferred
Loss
Profit (loss) attributable to:Non-controlling interests
Owners of parent¥458,622
449,552
9,069¥403,275
385,096
18,178$3,434,598
3,366,674
67,917

27,82825,638208,402(18,759)(7,459)(140,485)

1,094
91(1,357)
1,759
(338)
(416)
(381)
98
187
(62)

814
93
(987)
429
(410)
(185)
(512)
17
19
(3)

8,192
681
(10,162)
13,173(2,531)(3,115)(2,853)
733
1,400
(464)

(43)
(183)
447
(18,311)

(191)
(118)
(1,036)(8,495)(322)(1,370)3,347(137,130)

2,512
4,480
6,992

4,083
(6,026)(1,942)

18,81233,55052,362(25,304)(6,552)(189,500)397¥ (25,702)

469¥ (7,022)

2,973$ (192,481)(Yen)
Loss per share (Note 19)¥ (164.32)(U.S. dollars)(Note 3)¥ (44.93)$(1.231)

The accompanying notes are an integral part of these statements.

410

Sumitomo Mitsui Construction Co., Ltd.

Sumitomo Mitsui Construction Co., Ltd.
and Consolidated
Subsidiaries
Consolidated Statements of Comprehensive
IncomeMarch 31, 2023

Consolidated Statements of Comprehensive Income
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)Loss¥(25,304)¥(6,552)$(189,500)

Other comprehensive income:Unrealized holding loss on securities
Deferred gain on hedging instruments, net of taxes
Translation adjustments
Retirement benefits liability adjustments(1,625)
52
1,861
72

(962)
54
620
(29)

(12,169)389
13,936539

Total other comprehensive income (Note 8)
Comprehensive income

360¥24,943(316)¥(6,869)2,696$(186,796)

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥(25,409)
466¥(7,349)480$(190,286)
3,489

The accompanying notes are an integral part of these statements.

511

Mitsui Construction Co., Ltd.
Sumitomo Mitsui Construction Co.,Sumitomo
Ltd.
Consolidated Statements of Changes Inand
Net Consolidated
Assets
Subsidiaries
March 31, 2023

Consolidated Statements of Changes in Net Assets

Capitalstock
Balance at the beginning of theperiodCumulative effects of changes inaccounting policies
Restated balance
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Loss attributable to owners of
the parent
Purchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Transfer from retained earnings
to additional paid-in capital
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

Year ended March 31, 2023
Shareholders’ equity
Additional
Treasurypaid-instock,
Retained
capitalat costearnings(Millions of yen)

Totalshareholders’equity¥12,003¥―¥85,714¥(3,907)¥93,81112,003―85,714(3,907)

93,811674

674(3,125)(3,125)(25,702)

(33)

(2)
126

(25,702)
(2)
93
―

―
¥12,003641¥641(28,828)¥56,886

124¥(3,782)(28,062)¥ 65,748

Year ended March 31, 2023
Accumulated other comprehensive income
Deferred
Total
Unrealized
loss onRetirement accumulated
holding loss
hedgingotherbenefits
Nonon
instruments,
liability comprehensive controlling
Land
Translation
securities net of taxes revaluation adjustments adjustments
incomeinterests(Millions of yen)
Balance at the beginning of theperiodCumulative effects of changes inaccounting policies
Restated balance
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Loss attributable to owners of
the parent
Purchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Transfer from retained earnings
to additional paid-in capital
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

Total
net assets¥(555)¥(92)¥70¥(1,001)¥(843)¥(2,422)¥8,313¥99,701

(555)

(92)

70

(1,001)(843)(2,422)

8,313

99,701674(3,125)(25,702)(2)
93(1,625)

52

0

1,800

65

292

(793)

(501)

(1,625)¥(2,180)52¥ (40)

0
¥70

1,800
¥799

65
¥(778)

292¥(2,130)(793)¥7,519(28,563)¥ 71,1376

12

Mitsui Construction Co., Ltd.
Sumitomo Mitsui Construction Co.,Sumitomo
Ltd.
Consolidated Statements of Changes Inand
Net Consolidated
Assets
Subsidiaries
March 31, 2023

Consolidated Statements of Changes in Net Assets (continued)

CapitalstockYear ended March 31, 2023
Shareholders’ equity
Additional
Treasurypaid-instock,
Retained
capitalat costearnings(Thousands of U.S. dollars) (Note 3)

Total
shareholders’equityBalance at the beginning of theperiod$89,889$―$641,908$(29,259)$702,546

Cumulative effects of changes inaccounting policies
Restated balance

89,889―641,908(29,259)

702,546

Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Loss attributable to owners of
the parent
Purchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Transfer from retained earnings
to additional paid-in capital
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

5,047(192,481)(247)―$89,889

4,800$4,800

5,047(23,402)(23,402)(215,891)$426,016(14)
943(192,481)
(14)
696

928
$(28,323)(210,155)$492,383

Year ended March 31, 2023
Accumulated other comprehensive income
Deferred
Total
Unrealized
loss onRetirement accumulated
holding loss
hedgingotherbenefits
Nonon
instruments,
liability comprehensive controlling
Land
Translation
securities net of taxes revaluation adjustments adjustments
incomeinterests(Thousands of U.S. dollars) (Note 3)

Total
net assets

Balance at the beginning of theperiod$(4,156)$(688)$524$(7,496)$(6,313)$(18,138)$62,255$746,656

Cumulative effects of changes inaccounting policies
Restated balance(4,156)

(688)

524

(7,496)(6,313)(18,138)

62,255

746,656

Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Loss attributable to owners of
the parent
Purchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Transfer from retained earnings
to additional paid-in capital
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

5,047(23,402)(192,481)(14)
696(12,169)389

013,480486

2,186(5,938)(3,751)(12,169)$(16,325)389$ (299)0$524

13,480$ 5,983486$(5,826)

2,186$(15,951)(5,938)$56,309(213,906)$532,741

7

13

Mitsui Construction Co., Ltd.
Sumitomo Mitsui Construction Co.,Sumitomo
Ltd.
Consolidated Statements of Changes Inand
Net Consolidated
Assets
Subsidiaries
March 31, 2023

Consolidated Statements of Changes in Net Assets (continued)

Capitalstock
Balance at the beginning of theperiodCumulative effects of changes inaccounting policies
Restated balance
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Loss attributable to owners of
the parent
Purchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Transfer from retained earnings
to additional paid-in capital
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

Year ended March 31, 2022
Shareholders’ equity
Additional
Treasurypaid-instock,
Retained
capitalat costearnings(Millions of yen)

Totalshareholders’Equity¥12,003¥―¥96,001¥(3,504)¥104,499

12,003―(414)
95,586(3,504)(414)
104,085(1)(7,022)(20)―¥12,003(1)(2,828)(2,828)

1

21

(21)

―
¥―

(9,872)¥85,714(502)
100(7,022)
(502)
79
1
―

(402)
¥(3,907)(10,274)¥93,811

Year ended March 31, 2022
Accumulated other comprehensive income
Unrealized
holding Deferred loss
gain (loss) on hedging
on
instruments,Land
securities net of taxes revaluation
Balance at the beginning of theperiodCumulative effects of changes inaccounting policies
Restated balance

Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Loss attributable to owners of
the parent
Purchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Transfer from retained earnings
to additional paid-in capital
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

Total
Retirement accumulated
otherbenefits
Nonliability comprehensive controlling
Translation
incomeinterests
adjustments adjustments(Millions of yen)Total
net assets¥407¥(147)¥71¥(1,622)¥(803)¥(2,094)¥7,902¥110,308

407

(147)

71

(1,622)(803)(2,094)

7,902

(414)
109,894(1)(2,828)(7,022)
(502)
79
1
―
(962)

54

(1)

621

(40)

(328)

410

81

(962)
¥(555)

54
¥(92)

(1)
¥70

621
¥(1,001)(40)¥(843)(328)¥(2,422)410¥8,313(10,192)¥99,701

The accompanying notes are an integral part of these statements.
814

Mitsui Construction Co., Ltd.
Sumitomo Mitsui Construction Co.,Sumitomo
Ltd.
Consolidated Statements of Cash Flowsand Consolidated Subsidiaries
March 31, 2023
Consolidated Statements of Cash Flows
2023

Years ended March 31,

2022(Millions of yen)

Operating activities
Loss before income taxes
Depreciation and amortization
Impairment loss
Amortization on goodwill
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in reserve for defects on completed construction
projects
Increase in allowance for losses on construction contracts
Increase in allowance for share-based payment
Decrease in liability for retirement benefits(Gain) loss on sales and disposal of property and equipment
Gain on sales of investments in securities
Interest and dividend income
Interest expense
Exchange gain, net
Increase in trade notes receivable, accounts receivable on completed
construction contracts and other
Increase in inventories(Increase) decrease in other assets
Increase (decrease) in retirement benefits liability adjustments includedin accumulated other comprehensive income
Increase (decrease) in trade notes payable, accounts payable on
construction contracts and other
Increase in advances received on construction contracts in progress
Increase in other liabilities
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash (used in) provided by operating activities
Investing activities
Decrease in fixed deposits
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible fixed assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Disbursements for loans receivable
Proceeds from collection of loans receivable
Purchases of shares of subsidiaries resulting in change in scope of
consolidation (Note 10)
Other
Net cash used in investing activities

2023(Thousands of
U.S. dollars)(Note 3)¥(18,311)
4,362
62
405
2,271

¥(8,495)
3,296
3
－
(24)

$(137,130)
32,666464
3,033
17,00722
18,916
23
(437)
(55)
(181)
(1,094)
1,357
(706)

(265)
18,685
23
(201)
173
(19)
(814)
987
(565)

164
141,661172(3,272)(411)(1,355)(8,192)
10,162(5,287)(17,156)(2,460)(7,110)(2,467)(1,965)574(128,480)(18,422)(53,246)

83

(17)

621

1,481
6,228
355
(57)
(12,000)
1,120(1,349)(3,894)(16,123)

(407)
4,123
287
(7)
12,904792(988)(2,711)
9,996

11,091
46,641
2,658(426)(89,867)
8,387(10,102)(29,161)(120,744)

1,830(4,367)
323
(729)
(136)
67
(27)
123

875
(3,722)51(497)(3,865)
302
(23)
84

13,704(32,704)
2,418(5,459)(1,018)
501
(202)
921

(515)
(80)
(3,512)(6,211)
26(12,980)(3,856)(599)(26,301)915

Mitsui Construction Co., Ltd.
Sumitomo Mitsui Construction Co.,Sumitomo
Ltd.
Consolidated Statements of Cash Flowsand Consolidated Subsidiaries
March 31, 2023

Consolidated Statements of Cash Flows (continued)2023

Years ended March 31,

2022(Millions of yen)

Financing activities
Decrease in short-term bank loans
Proceeds from long-term debt
Payments of long-term debt
Increase in long-term loans of employees
Proceeds from issuance of corporate bonds
Increase in treasury stock
Cash dividends paid
Cash dividends paid for non-controlling shareholders
Repayments of lease obligations
Payments from changes in ownership interests in subsidiaries that do
not result in change in scope of consolidation
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year (Note 10)2023(Thousands of
U.S. dollars)(Note 3)¥ (150)17,250(2,662)
148
5,000
(1)
(3,117)(747)(1,084)¥(1,173)
10,000(7,212)332－(502)(2,822)
(126)
(643)

$ (1,123)
129,184(19,935)
1,108
37,444(7)(23,343)(5,594)(8,118)(434)
14,200－(2,148)(3,250)106,343

1,155(4,279)65,108¥60,828648(4,483)69,591¥65,108

8,649(32,045)487,590$455,538

The accompanying notes are an integral part of these statements.

1016and Consolidated Subsidiaries
Notes
Sumitomo Mitsui Construction Co.,
Ltd. to Consolidated Financial Statements
Notes to Consolidated Financial Statements
March 31, 2023
March 31, 2023
1.

Basis of Preparation

The accompanying consolidated financial statements of Sumitomo Mitsui Construction Co.,
Ltd. (the “Company”) and consolidated subsidiaries (collectively the “Group”) are preparedon the basis of accounting principles generally accepted in Japan, which are different incertain respects as to the application and disclosure requirements of International Financial
Reporting Standards, and have been compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments and Exchange Law ofJapan.
Certain reclassifications have been made to present the accompanying consolidated financial
statements in a format which is familiar to readers outside Japan. In addition, certain amounts
in the prior year’s financial statements have been reclassified to conform to the current year’s
presentation.
As permitted, amounts of less than one million yen have been omitted. As a result, the totals
shown in the accompanying consolidated financial statements do not necessarily agree withthe sums of the individual amounts.
2.

Summary of Significant Accounting Policies(a) Basis of Consolidation and Accounting for Investments in Unconsolidated Subsidiaries
and Affiliates
The accompanying consolidated financial statements include the accounts of the Company
and the significant companies which it controls directly or indirectly. Companies overwhich the Company exercises significant influence in terms of their operating andfinancial policies have been included in the consolidated financial statements on an
equity basis. In the elimination of investments in subsidiaries, the assets and liabilitiesof the subsidiaries, including the portion attributable to non-controlling shareholders,
are recorded based on the fair value at the time the Company acquired control of therespective subsidiaries. All significant intercompany balances and transactions havebeen eliminated in consolidation.
The excess of the cost over the underlying net assets at fair value at the respective datesof acquisition of the consolidated subsidiaries (goodwill) or the excess of fair value ofthe net assets acquired over cost (negative goodwill) is charged or credited to income inthe year of acquisition.
Investments in affiliates not accounted for by the equity method are principally stated at
cost.
The Company had 22 consolidated subsidiaries and 1 affiliate accounted for by theequity method as of March 31, 2023.
11

17

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(b) Fiscal Year of Consolidated Subsidiaries
All foreign consolidated subsidiaries (11 companies) have a fiscal year that ends on
December 31. The accompanying consolidated financial statements were preparedbased on the financial statements as of the same date. Necessary adjustments forconsolidation were made on significant transactions that took place during the period
between the fiscal year-end of the subsidiaries and the fiscal year-end of the Company.
(c) Securities
The accounting standard for financial instruments requires that securities be classified
into three categories: trading, held-to-maturity or other securities. Trading securities arecarried at fair value and held-to-maturity securities are carried at amortized cost. For
other securities, securities other than shares, etc. with no market value are carried at fairvalue with any changes in unrealized holding gain or loss, net of the applicable income
taxes, included directly in net assets. Shares, etc. with no market value are carried at cost.
Cost of securities sold is determined by the moving average method.
(d) Inventories
Inventories other than materials and supplies are stated at cost determined by the specificidentification method. Materials and supplies are valued at cost determined by theaverage method. Cost of real estate for sale and materials and supplies is written downwhen their carrying amounts become unrecoverable.
(e) Depreciation and Amortization(1) Property and equipment (except leased assets) and investments in real estate
Depreciation of property and equipment (except leased assets) and investments inreal estate is determined primarily by the declining-balance method based on theestimated useful lives and the residual value of the respective assets as prescribedin the Corporation Tax Law of Japan except that the straight-line method is applied
to office buildings (except facilities attached to buildings) acquired on or after April
1, 1998 and facilities attached to buildings and structures acquired on or after April
1, 2016.
Depreciation at all overseas subsidiaries is determined by the straight-line method
or by the declining-balance method based on the estimated useful lives of therespective assets.
(2) Intangible fixed assets (except leased assets)
Amortization of intangible fixed assets (except leased assets) is calculated by thestraight-line method based on the estimated useful lives of the respective assets asprescribed in the Corporation Tax Law of Japan. Amortization of computer software
for internal use is calculated by the straight-line method over the estimated useful
lives of 5 years.

18

12

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(e) Depreciation and Amortization (continued)(3) Leased assets
Depreciation of leased assets under finance leases other than those that transfer theownership of the leased assets to the lessees is calculated by the straight-line
method over the lease term with a residual value of zero.
(f)Advances Received on Construction Contracts in Progress
As is customary in Japan, the Company and its domestic consolidated subsidiaries
receive payments from customers on an installment basis in accordance with the termsof the respective construction contracts.

(g) Allowance for Doubtful Receivables
An allowance for doubtful receivables has been provided for future losses on general
receivables at an amount calculated by applying the percentage of actual losses oncollection experienced in the past, and an uncollectible amount for doubtful receivables
estimated based on an individual assessment of each receivable and probability ofcollection.
(h) Reserve for Defects on Completed Construction Projects
A reserve has been provided at an estimated amount for the fiscal year’s sales proceeds inorder to cover the liability for future costs of defects of the completed construction
projects.
(i)

Allowance for Losses on Construction Contracts
An allowance has been provided based on the estimated amount for the future losses on
construction projects in progress at the fiscal year end which are anticipated to be
substantial losses in the future.

(j)

Allowance for Contingency Loss
An allowance for contingency loss related to the defective piling work at a condominium
in Yokohama has been provided based on the reasonably estimated amount necessary
for payments to be borne as the contractor in accordance with defect liability applicableto the construction contract.

(k) Allowance for Share-based Payment
An allowance has been provided based on the estimated amount for share-based
payment liability as of March 31, 2023 in order to cover payments of share to directors
based on a share-based payment regulation.

19

13

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(l)

Accounting for Retirement Benefits(1) Method of attributing expected retirement benefits to periods
In calculating the retirement benefit obligation, the benefit formula method isapplied to attribute the expected retirement benefits to the periods up to year ended
March 31, 2023.
(2) Amortization of actuarial gain or loss and prior service cost
Actuarial gain or loss is amortized in the year following the year in which the gainor loss is recognized by the straight-line method over periods (mainly 11 years),
which are shorter than the average remaining years of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method overperiods (mainly 11 years), which are shorter than the average remaining years ofservice of the employees.

(m) Recognition of Revenues and Costs
The Group is primarily engaged in civil construction and building construction,
providing construction design and construction work services as well as other related
services to its domestic and overseas customers.
In civil and building construction, the Group primarily enters into long-term construction
contracts. For such contracts, the completion and delivery of construction work is
identified as a performance obligation. Performance obligations are deemed to besatisfied over time, and revenue is recognized based on progress toward complete
satisfaction of a performance obligation. The progress toward complete satisfaction of aperformance obligation is measured based on the proportion of construction costs
incurred by the end of the reporting period to the total expected construction costs. Whenthe progress toward complete satisfaction of a performance obligation cannot bereasonably measured, but the costs to be incurred are expected to be recovered, revenue
is recognized only to the extent of the costs incurred, except for those contracts that arein the initial stages of construction. For construction contracts whose period between thedate of commencement of the transaction and the point in time when the performanceobligation is expected to be fully satisfied is very short, an alternative treatment is applied,
whereby revenue is not recognized over time, but is recognized when the performanceobligation is fully satisfied.
(n) Derivatives and Hedge Accounting(1) Method of hedge accounting
Derivative financial instruments are mainly stated at fair value except thoseaccounted for under deferred hedge accounting.
Interest rate swaps qualifying for hedge accounting and meeting specific matching
criteria are not re-measured at market value, but the differential paid or received
under the swap agreements is charged or credited to income (short-cut method).
20

14

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(n) Derivatives and Hedge Accounting (continued)(2) Hedging instruments and hedged items
Hedging instruments:

Interest rate swaps

Hedged items:

Interest on debt

(3) Hedging policy
The Company utilizes interest rate swaps only for the purpose of hedging futurerisks of fluctuation of interest rates.
(4) Assessment of hedge effectivenessAn evaluation of hedge effectiveness for interest rate swaps by principle method is
performed on a quarterly basis to confirm that there is a strong correlation between
hedged items and hedging instruments by comparing accumulated amount of thechange of cash flows of hedged items and accumulated amount of the change ofcash flows of hedging instruments to assess whether the forward contract qualifies
for hedge accounting. However, the evaluation of hedge effectiveness is omitted incase of interest rate swaps meeting specific matching criteria.
(o) Method and Period of Amortization of Goodwill
In principle, goodwill is amortized on a straight-line basis over the period for which
goodwill is expected to have an effect, which shall not exceed 20 years.
(p) Cash Equivalents
All highly liquid investments with a maturity of three months or less when purchased,
which can easily be converted to cash and are subject to little risk of change in value,
are considered cash equivalents.
(q) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between theamounts calculated for financial reporting purposes and the tax bases of the assets andliabilities and are measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
The Company and its domestic consolidated subsidiaries has adopted the group tax
sharing system from the current fiscal year.
(r)

Accounting Method of Joint Ventures for Construction Project
Assets, liabilities, costs and profits for a joint venture project are mainly recognized on
pro-rata basis of investment ratio of each members.
21

15

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

3.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan and has been made, as a matter of arithmetic computation only, at¥133.53 = U.S.$1.00, the approximate rate of exchange in effect on March 31, 2023. Thistranslation should not be construed as a representation that yen have been, could have been,or could in the future be, converted into U.S. dollars at that or any other rate.
4.

Significant Accounting Estimates

For the year ended March 31, 2023
(a) Allowance for Contingency Loss
(1) Amounts recognized on the consolidated financial statements for this fiscal year

Allowance for contingency loss

As of March 31, 2023
(Millions of yen)(Thousands of U.S. dollars)¥2,159$16,168(2) Information on significant accounting estimates for the item above
An allowance for contingency loss related to the defective piling work at acondominium in Yokohama has been provided based on the reasonably estimatedamount necessary for payments to be borne as the contractor in accordance withdefect liability applicable to the construction contract.
Mitsui Fudosan Residential Co., Ltd. (hereinafter as “MFR”), which is one of thedevelopers of the apartment, initiated a lawsuit against the Company and two pilingcompanies on November 28, 2017, claiming about 45.9 billion yen (which amountincreased to approximately 51.0 billion yen on July 11, 2018, and decreased fromapproximately 51.0 billion yen to approximately 50.6 billion yen on September 30,2022) as alleged rebuilding cost for the whole structure of the apartment. The
Company considers that MFR’s claim lacks legal foundation and reason, and willcontinue to make appropriate arguments in that court proceeding.

22

16

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(b) Recognition of Revenues from Construction Contracts(1) Amounts recognized on the consolidated financial statements for this fiscal year
Year ended March 31, 2023
(Millions of yen) (Thousands of U.S. dollars)
Net sales of construction contracts,
etc. related to performanceobligations to be satisfied over time¥403,453$3,021,440(2) Information on significant accounting estimates for the item above
For construction contracts, etc. whose performance obligations are satisfied overtime, the progress toward complete satisfaction of a performance obligation ismeasured and net sales of completed construction contracts are recognized overtime based on such progress toward satisfaction of the performance obligation.
It is necessary to estimate total revenues and costs of a project reasonably uponrecognition. The Group’s results may fluctuate due to changes in net sales and costsof completed construction contracts as a result of negotiations with clients,
unanticipated incurrence of costs, or other reasons.
For the year ended March 31, 2022(a) Allowance for Contingency Loss
(1) Amounts recognized on the consolidated financial statements for this fiscal year

Allowance for contingency loss

As of March 31, 2022
(Millions of yen)
¥2,159(2) Information of significant accounting estimates for the item above
An allowance for contingency loss related to the defective piling work at acondominium in Yokohama has been provided based on the reasonably estimatedamount necessary for payments to be borne as the contractor in accordance withdefect liability applicable to the construction contract.
Mitsui Fudosan Residential Co., Ltd. (hereinafter as “MFR”), which is one of thedevelopers of the apartment, initiated a lawsuit against the Company and two pilingcompanies on November 28, 2017, claiming about 45.9 billion yen (which amountincreased to approximately 51.0 billion yen on July 11, 2018) as alleged rebuilding
cost for the whole structure of the apartment. The Company considers that MFR’s
claim lacks legal foundation and reason, and will continue to make appropriate
arguments in that court proceeding.

23

17

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

4.

Significant Accounting Estimates (continued)

For the year ended March 31, 2022(b) Recognition of Revenues from Construction Contracts(1) Amounts recognized on the consolidated financial statements for this fiscal year
Year ended
March 31, 2022
(Millions of yen)
Net sales of construction contracts,
etc. related to performanceobligations to be satisfied over time

¥346,875(2) Information of significant accounting estimates for the item above
For construction contracts, etc. whose performance obligations are satisfied overtime, the progress toward complete satisfaction of a performance obligation ismeasured and net sales of completed construction contracts are recognized overtime based on such progress toward satisfaction of the performance obligation.
It is necessary to estimate total revenues and costs of a project reasonably uponrecognition. The Group’s results may fluctuate due to changes in net sales and costsof completed construction contracts as a result of negotiations with clients,
unanticipated incurrence of costs, or other reasons.
5.

Unapplied Accounting Standard and Implementation Guidance“Accounting Standard for Current Income Taxes, etc.” (ASBJ Statement No. 27 issued on
October 28, 2022)“Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25
issued on October 28, 2022)“Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No. 28 issued on
October 28, 2022)(1) Outline
Provisions on the classification of recording of income taxes, etc. when taxing othercomprehensive income and the treatment of tax effects related to the sales ofsubsidiary shares, etc. when the group corporate tax system is applied.
(2) Scheduled Date of Application
The Company will apply the accounting standard and the implementation guidancefrom the beginning of the year ending March 31, 2025.
(3) Impact of the Application of the Unapplied Accounting Standard and the
Implementation Guidance
The Company is currently assessing the effects of application of the accounting
standards and the implementation guidance on its consolidated financial statements.
24

18

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

6.

Notes to Consolidated Balance Sheets(a) Receivables and Contract Assets from Contracts with Customers
Receivables and contract assets from contracts with customers included in trade notes
receivable, accounts receivable on completed construction contracts and other as ofMarch 31, 2023 and 2022 were as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Trade notes receivable
Accounts receivable on completed
construction contracts and other
Contract assets¥ 3,296¥ 3,988$

24,68387,480124,443¥215,22077,431
115,750¥197,169

655,133
931,947$1,611,772(b) Inventories
The components of inventories as of March 31, 2023 and 2022 were as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Merchandise and finished goods
Materials and supplies
Costs on uncompleted construction
contracts

¥

94
9,973

20,357¥30,425

¥

49
5,736

22,096¥27,882$703
74,687

152,452$227,851

25

19

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(c) Pledged Assets
The following assets were pledged at March 31, 2023 and 2022 principally as collateralfor short-term bank loans, long-term debt, and guarantees (such as guarantees for thecompletion of construction contracts):
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Land
Buildings and structures, net ofaccumulated depreciation
Machinery, equipment and vehicles,
net of accumulated depreciation
Investments in securities
Securities
Others (Investments and other assets)¥5,872¥6,070$43,975

1,692

550

12,671

128
4
285
10
¥7,994

159
4
139
10
¥6,933

958
29
2,134
74
$59,866

In addition to the assets pledged as collateral above, ¥358 million ($2,681 thousand) of
shares of affiliated companies (subsidiary shares) that have been offset and eliminatedfrom the consolidated financial statements are pledged as collateral.
Of the above property and equipment, mortgaged assets for factory foundations at
March 31, 2023 and 2022 were summarized as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Land
Buildings and structures, net ofaccumulated depreciation
Machinery, equipment and vehicles,
net of accumulated depreciation¥1,258¥1,258$9,421

282

293

2,111

128
¥1,669159¥1,711

958$12,499

The secured liabilities as of March 31, 2023 and 2022 were summarized as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Short-term bank loans[Including current portion of
long-term debt]
Long-term debt

¥ 12

¥ 12

$ 89

[12]
43

[12]
56

[89]
322

26

20

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(d) Land Revaluation
Land for operations was revalued by two consolidated subsidiaries under the Law forLand Revaluation during the year ended March 31, 2001. Land for operations wasrevalued by consolidated subsidiaries under the Law for Land Revaluation during theyear ended March 31, 2002. The revaluation amounts are shown as a separate
component of net assets.
The market value of the land was less than the revalued book amount by ¥681 million($5,099 thousand) and ¥720 million at March 31, 2023 and 2022, respectively.
(e) Contingent Liabilities
At March 31, 2023 and 2022, the Company and its consolidated subsidiaries were
contingently liable for the following:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
As guarantors for house building fundfor employees
As guarantors for compensation forlump-sum move-in payment for
Amenity Life Co., Ltd.
As guarantors for performance
guarantee insurance policy for Sakai
School Lunch Partners Co., Ltd.
Advance deposits

¥–

¥2

$–

487

637

3,647

819
609

–
482

6,133
4,560

The Company’s affiliated company, Sakai School Lunch Partners Co., Ltd., a special
purpose company, has concluded a performance guarantee insurance contract with aguarantor organization, and provides joint guarantee for the compensation debt to beborne in the event of a claim based on the contract.
(f)

Estimated Loss on Uncompleted Construction Contracts
An estimated loss on uncompleted construction contracts was recognized and included
as part of inventories but was not offset against the amount on the balance sheet. It has
been recorded as an allowance for losses on construction contracts in the amounts of¥332 million ($2,486 thousand) and ¥207 million as of March 31, 2023 and 2022,
respectively.

(g) Contract Liabilities
Advances received on construction contracts in progress included contract liabilities in
the amounts of ¥35,262 million ($264,075 thousand) and ¥28,635 million as of March
31, 2023 and 2022, respectively.

27

21

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants
As of March 31, 2023
(1) The Company has entered into a loan commitment agreement dated on March 31,
2016 with its seven banks with Sumitomo Mitsui Banking Corporation as arranger.
The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2016 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2014 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2023.
Unused amount on loan commitment agreement as of March 31, 2023 and 2022
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥20,000¥20,000$149,779–––¥20,000¥20,000$149,779(2) The Company has entered into a syndicated loan contract dated on September 28,
2016 with its seven banks (including five different banks from (1) above) with
Sumitomo Mitsui Banking Corporation as arranger. The following financial
covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,2017 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2016 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥1,750 million ($13,105 thousand) in long-term debt (including the current
portion) as of March 31, 2023.

28

22

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)(3) The Company has entered into a committed syndicated loan contract dated on
March 30, 2018 with its seven banks (same bank as we had contracted for theyear ended March 31, 2016) with Sumitomo Mitsui Banking Corporation asarranger. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,2018 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2017 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥10,000 million ($74,889 thousand) in long-term debt (including thecurrent portion) as of March 31, 2023.
Unused amount on the committed syndicated loan contract as of March 31, 2023
and 2022 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥10,000¥10,000$74,889
10,00074,88910,000¥–¥–$–(4) The Company has entered into a committed syndicated loan contract dated on
December 26, 2019 with its ten banks (including six different banks from (3)above) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2020 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2019 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥10,000 million ($74,889 thousand) in long-term debt as of March 31,
2023.
29

23

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)
Unused amount on the committed syndicated loan contract as of March 31, 2023
and 2022 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥10,000¥10,000$74,889
10,00074,88910,000¥–¥–$–(5) The Company has entered into a general syndicated committed loan contract datedon June 25, 2020 with its twenty-five banks with Sumitomo Mitsui Banking
Corporation as arranger. The following financial covenant is included in thecontract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥15,000 million ($112,334 thousand) in long-term debt as of March 31,2023.
Unused amount on the committed syndicated loan contract as of March 31, 2023
and 2022 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥15,000¥15,000$112,334
15,000112,334
15,000¥–¥–$–(6) The Company has entered into a syndicated loan contract dated on September 29,
2020 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust Bank,
Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
30

24

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)
In addition, the balance of bank borrowings under this syndicated loan contract is¥1,000 million ($7,488 thousand) in long-term debt (including the current portion)
as of March 31, 2023.
(7) The Company has entered into a syndicated loan contract dated on March 29, 2021
with its seven banks (same bank as we had contracted for the year ended March 31,2016) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million ($74,889 thousand) in long-term debt as of March 31, 2023.
(8) The Company has entered into a syndicated loan contract dated on March 28, 2022with its eight banks (same bank as we had contracted for the year ended March 31,2016) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2022 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2021 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million ($74,889 thousand) in long-term debt as of March 31, 2023.
(9) The Company has entered into a committed syndicated loan contract dated on
March 28, 2022 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui
Trust Bank, Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2022 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2021 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
31

25

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥6,300 million ($47,180 thousand) in long-term debt (including thecurrent portion) as of March 31, 2023.
Unused amount on the committed syndicated loan contract as of March 31, 2023
and 2022 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥7,000¥7,000$52,422
7,000–
52,422¥–¥ 7,000$–(10) The Company has entered into a loan commitment agreement dated on May 24,
2022 with its seven banks (same bank as we had contracted for the year ended
March 31, 2016) with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of the second quarter of the fiscal year
ended March 31, 2023 shall be equal to or exceed 75% of total consolidated net
assets as of March 31, 2022.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2023.
Unused amount on loan commitment agreement as of March 31, 2023 and 2022
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥30,000¥–$224,668–––¥30,000¥–$224,668

32

26

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)(11) The Company has entered into a loan commitment agreement dated on June 27,
2022 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust
Bank, Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of the second quarter of the fiscal year
ended March 31, 2023 shall be equal to or exceed 75% of total consolidated net
assets as of March 31, 2022.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2023.
Unused amount on loan commitment agreement as of March 31, 2023 and 2022
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥20,000¥–$149,779–––¥20,000¥–$149,779(12) The Company has entered into a general syndicated committed loan contract dated
on September 27, 2022 with its twenty-one banks with Sumitomo Mitsui Banking
Corporation as arranger. The following financial covenant is included in thecontract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2023 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2022 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under the syndicated loan contract is¥10,000 million ($74,889 thousand) in long-term debt as of March 31, 2023.
Contracts other than (10) and (11) above are in conflict with financial covenants at
the end of the current consolidated fiscal year, however, as of May 19, 2023, theCompany obtained approval from our financial institutions to not exercise theirright to lose profits for the time limit due to such conflicts.

33

27

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)
As of March 31, 2022
(1) The Company has entered into a loan commitment agreement dated on March 31,
2016 with its seven banks with Sumitomo Mitsui Banking Corporation as arranger.
The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2016 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2014 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2022.
Unused amount on loan commitment agreement as of March 31, 2022 and 2021
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2021
2022
(Millions of yen)
¥20,000¥20,000––¥20,000¥20,000(2) The Company has entered into a syndicated loan contract dated on September 28,
2016 with its seven banks (including five different banks from (1) above) with
Sumitomo Mitsui Banking Corporation as arranger. The following financial
covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,2017 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2016 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥2,250 million in long-term debt (including the current portion) as of March 31,
2022.
(3) The Company has entered into a committed syndicated loan contract dated on
March 30, 2018 with its seven banks (same bank as we had contracted for theyear ended March 31, 2016) with Sumitomo Mitsui Banking Corporation asarranger. The following financial covenant is included in the contract:34

28

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)
Total consolidated net assets at the end of each fiscal year beginning March 31,2018 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2017 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥10,000 in long-term debt as of March 31, 2022.
Unused amount on the committed syndicated loan contract as of March 31, 2022
and 2021 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2022
2021
(Millions of yen)
¥10,000¥10,000
10,00010,000¥–¥–(4) The Company has entered into a committed syndicated loan contract dated on
December 26, 2019 with its ten banks (including six different banks from (3)above) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2020 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2019 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥10,000 million in long-term debt as of March 31, 2022.
Unused amount on the committed syndicated loan contract as of March 31, 2022
and 2021 were as follows.

35

29

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2022
2021
(Millions of yen)
¥10,000¥10,000
10,00010,000–¥–¥(5) The Company has entered into a general syndicated committed loan contract datedon June 25, 2020 with its twenty-five banks with Sumitomo Mitsui Banking
Corporation as arranger. The following financial covenant is included in thecontract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥15,000 million in long-term debt as of March 31, 2022.
Unused amount on the committed syndicated loan contract as of March 31, 2022
and 2021 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2022
2021
(Millions of yen)
¥15,000¥15,000
15,00015,000¥–¥–(6) The Company has entered into a syndicated loan contract dated on September 29,
2020 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust Bank,
Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥2,200 million in long-term debt (including the current portion) as of March 31,
2022.
36

30

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)(7) The Company has entered into a syndicated loan contract dated on March 29, 2021
with its seven banks (same bank as we had contracted for the year ended March 31,2016) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million in long-term debt as of March 31, 2022.
(8) The Company has entered into a loan commitment agreement dated on May 25,
2021 with its seven banks (same bank as we had contracted for the year ended
March 31, 2016) with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of the second quarter of the fiscal year
ended March 31, 2022 shall be equal to or exceed 75% of total consolidated net
assets as of March 31, 2021.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2022.
Unused amount on loan commitment agreement as of March 31, 2022 and 2021
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2022
2021
(Millions of yen)
¥30,000¥–––¥–¥30,000(9) The Company has entered into a loan commitment agreement dated on June 25,
2021 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust
Bank, Limited. The following financial covenant is included in the contract:37

31

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)
Total consolidated net assets at the end of the second quarter of the fiscal year
ended March 31, 2022 shall be equal to or exceed 75% of total consolidated net
assets as of March 31, 2021.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2022.
Unused amount on loan commitment agreement as of March 31, 2022 and 2021
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2022
2021
(Millions of yen)
¥20,000¥–––¥–¥20,000(10) The Company has entered into a syndicated loan contract dated on March 28, 2022with its seven banks (same bank as we had contracted for the year ended March 31,2016) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2022 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2021 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million in long-term debt as of March 31, 2022.
(11) The Company has entered into a committed syndicated loan contract dated on
March 28, 2022 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui
Trust Bank, Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2022 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2021 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
38

32

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(h) Financial Covenants (continued)
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the committed
syndicated loan contract as of March 31, 2022.
Unused amount on the committed syndicated loan contract as of March 31, 2022
and 2021 were as follows.
As of March 31,
2022
2021
(Millions of yen)
Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)
7.

¥7,000–¥7,000¥––¥–Notes to Consolidated Statements of Income(a) Revenue from Contracts with Customers
Net sales are not presented separately for revenues from contracts with customers andother revenues. The amounts of revenues from contracts with customers are presented
in “Notes to the Consolidated Financial Statements (Segment Information, etc.).”(b) Allowance for Losses on Construction Contracts Included in Cost of Sales
The allowance for losses on construction contracts was included in cost of sales in theamounts of ¥22,132 million ($165,745 thousand) and ¥19,219 million for the years
ended March 31, 2023 and 2022, respectively.
(c) Selling, General and Administrative Expenses
The significant components of selling, general and administrative expenses for the years
ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Salaries and wages
Retirement benefit expenses
Provision of allowance for doubtfulreceivables
Other
Total

¥12,397672¥11,918658$ 92,840
5,032(0)14,759¥27,8280
13,061¥25,638(0)
110,529$208,402

39

33

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(d) Research and Development Expenses
Research and development costs included in selling, general and administrative
expenses and manufacturing costs amounted to ¥2,133 million ($15,973 thousand) and¥2,484 million for the years ended March 31, 2023 and 2022, respectively.
(e) Gain on Sales of Property and Equipment
The significant components of gain on sales of property and equipment for the years
ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
¥10
¥0
$74
19
17
142
69
–
516
¥98
¥17
$733

Buildings and structures
Machinery, equipment and vehicles
Land
Total
(f)

Loss on Sales and Disposal of Property and Equipment
The significant components of loss on sales and disposal of property and equipment for
the years ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Loss on disposal
Loss on sales
Total

(g)

¥42
1
¥43

¥191
0
¥191

$314
7
$322

Impairment loss
In this fiscal year, the Company recorded impairment losses on the following asset
groups.
Location

Usage

Classification

Nishiyodogawa-ku,
Osaka-shi, Osaka

Asphalt composite
materials plant

Buildings and structures,
machinery and equipment,
and others (tools andequipment)

Years ended March 31, 2023

(Millions of yen)(Thousands of
U.S. dollars)

¥62

$464

As a general rule, the Group groups business assets based on business units undermanagement accounting, which continuously keep track of income and expenditure.
In addition, idle assets are grouped for each individual property.
In this fiscal year, regarding assets or groups of assets that have significantly reduced
profitability, the carrying value of the following assets was reduced to recoverable value,
and the decrease was recorded as impairment loss that amounted to ¥62 million ($46440

34

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

thousand) under other expenses for the year ended March 31, 2023. The breakdown is¥20 million ($149 thousand) for buildings and structures, ¥40 million ($299 thousand)for machinery and equipment, and ¥1 million ($7 thousand) for others.
The recoverable value of such assets is measured by value in use and is calculated bydiscounting future cash flow by 5.7%.
8. Notes to Consolidated Statements of Comprehensive Income
Amount of recycling and amount of income tax effects associated with other comprehensive
income for the years ended March 31, 2023 and 2022 were as follows:
2023

Years ended March 31,

2022(Millions of yen)
Unrealized holding loss on securities:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Unrealized holding loss on securities

2023(Thousands of
U.S. dollars)¥(1,221)(163)(1,385)(240)(1,625)¥(1,370)(16)(1,387)424(962)$(9,144)(1,220)(10,372)(1,797)(12,169)

93
–
93
(40)
52

78
–
78
(23)
54

696
–
696
(299)
389

Translation adjustments:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Translation adjustments

1,861
–
1,861
–
1,861

620
–
620
–
620

13,936–
13,936–
13,936Retirement benefits liability adjustments:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Retirement benefits liability adjustments
Total other comprehensive income (loss)

(55)
139
83
(10)
72
360

(34)
16
(17)
(11)
(29)
¥(316)

(411)
1,040
621
(74)
539
$ 2,696

Deferred gain on hedging instruments, net of taxes:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Deferred gain on hedging instruments, net of taxes

¥

41

35

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

9.

Notes to Consolidated Statements of Changes in Net Assets(a) Type and Number of Shares Issued and Treasury Stock
For the year ended March 31, 2023
Balance atApril 1,
2022
Shares issued:
Common stock

162,673,321
Balance atApril 1,
2022

Treasury stock:
Common stock

6,382,798

Increase
Decrease(Number of shares)––

Increase
Decrease(Number of shares)
5,031

207,314

Balance at
March 31,2023

162,673,321
Balance at
March 31,2023

6,180,515

Note 1:

Increase of common stock is due to the purchase of fractional 5,031 shares.

Note 2:

Decrease of common stock is due to the sale of fractional 626 shares in response to shareholder
requests and the disposition of treasury stock of 206,688 shares as the compensation of
restricted stocks based on the resolution of the board of directors held on July 15, 2022.

For the year ended March 31, 2022
Balance atApril 1,
2021
Shares issued:
Common stock

162,673,321
Balance atApril 1,
2021

Treasury stock:
Common stock

5,511,604

Increase
Decrease(Number of shares)––

Increase
Decrease(Number of shares)
1,035,490

164,296

Balance at
March 31,2022

162,673,321
Balance at
March 31,2022

6,382,798

Note 1:

Increase of common stock is due to the purchase of fractional 5,990 shares and the acquisitionof treasury stock of 1,029,500 shares based on the resolution of the board of directors held on
February 10, 2021.

Note 2:

Decrease of common stock is due to the sale of fractional 277 shares in response to shareholder
requests and the disposition of treasury stock of 164,019 shares as the compensation of
restricted stocks based on the resolution of the board of directors held on July 20, 2021.

42

36

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(b)

Dividends(1) Dividends paid
For the year ended March 31, 2023

Resolution

Type of shares

Annual general
meeting of theshareholders on
June 29, 2022

Common stock

Total
dividends Dividends(Millions of per share
(Yen)
yen)
¥3,125

Total
dividends(Thousandsof U.S.
dollars)

Dividends
per share(U.S.
dollars)$23,402$0.150¥20.00Cut-off
date

Effective
date

March 31,2022

June 30,2022

For the year ended March 31, 2022

Resolution
Annual general
meeting of theshareholders on
June 29, 2021

Type of shares
Common stock

Total
dividends(Millions ofyen)

Dividends
per share(Yen)¥2,828¥18.00Cut-off
date

Effective
date

March 31,2021

June 30,2021(2) Dividends with the cut-off date in the year ended March 31, 2023 and the effective
date in the year ending March 31, 2024 were as follows:

Resolution
Annual general
meeting of theshareholders on
June 29, 2023

Type ofshares

Source ofdividends

Commonstock

Retainedearnings

Total
dividends(Millionsof yen)¥2,190

Dividends
per share
(Yen)

Total
dividends(Thousandsof U.S.
dollars)

Dividends
per share(U.S.
dollars)Cut-off
date

Effectivedate¥14.00$16,400$0.105March
31, 2023

June 30,
2023

Dividends with the cut-off date in the year ended March 31, 2022 and the effective
date in the year ending March 31, 2023 were as follows:

Resolution

Type of shares

Annual general
meeting of theshareholders on
June 29, 2022

Common stock

Source ofdividends

Total dividends(Millions of yen)

Dividends
per share(Yen)

Retainedearnings¥3,125¥20.00Cut-off
date

Effective
date

March 31,2022

June 30,
2022

43

37

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

10. Notes to Consolidated Statements of Cash Flows
Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2023 and 2022 were as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Time deposits with maturities of overthree months
Cash and cash equivalents¥65,142¥70,974$487,845(4,314)¥60,828(5,865)¥65,108(32,307)$455,538

Assets and liabilities of a company that became a consolidated subsidiary due toacquisition of stock
For the year ended March 31, 2023
Not applicable.
For the year ended March 31, 2022
Antara Koh Private Limited and its subsidiaries Antara Koh (Myanmar) Ltd, AKM Sdn.
Bhd and Antara Koh (Malaysia) Sdn. Bhd were consolidated as the company’s
subsidiaries by acquisition of stocks. Detail of assets and liabilities of the subsidiaries
at the time of consolidation, acquisition price of stocks and net payments for acquisition
at March 31, 2022 were as follows:
Years ended
March 31,2022

(Millions of yen)
Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Acquisition price of stocks
Accounts payable included in acquisition price ofstocksCash and cash equivalents
Balance: payments for acquisition¥2,515
4,668
2,919(1,589)
(859)
7,654
(638)
(804)
¥6,211

44

38

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

11.

Financial Instruments(a) Overview(1) Policy for financial instruments
The Group limits investments of surplus funds to short-term bank deposits andraises necessary funds through bank loans.
In addition, the Group only uses derivatives for hedging risk of fluctuation offoreign currency exchange rates or interest rates, not for speculative transactions.
(2) Types of financial instruments and related risk and risk management system
Trade notes receivable, accounts receivable on completed construction contracts
and other are exposed to credit risk in relation to customers and trading partners.
Also, the Group’s main investments in securities are shares of companies, and they
are exposed to market price fluctuation risk.
Management of credit risks (Risks of default by customers and trading partners)
The Company manages due dates and balances of trade notes receivable, accounts
receivable on completed construction contracts and other for individual customers
and trading partners through its internal systems and monitors their credit status.
These systems enable the Group to identify any concerns for doubtful receivables at
an early stage and reduce risks of uncollectible amounts. Consolidated subsidiaries
also manage credit risks in the same manner as the Company. The Company
minimizes credit risks by mainly holding held-to-maturity securities with highcredit ratings.
Management of market risks (Risks of fluctuations in currency exchange andinterest rates)
The Company and certain consolidated subsidiaries hold trade receivables inforeign currencies. However, the risk of fluctuations in the currency exchange rate
is not significant because a similar amount of trade payables is also held, and theCompany utilizes foreign exchange forward contracts to hedge the risk of changes
in the foreign currency exchange rate.
Loan payables are mainly used for operating funds. The Group manages loan
payables by flexibly preparing or revising its fund management plans.
Derivatives are foreign currency exchange forward contracts held for the purposeof hedging future risk of fluctuation of foreign currency exchange rate of themonetary liabilities denominated in foreign currencies, and interest rate swaps held
for the purpose of hedging future risk of fluctuation of interest rates on loan payables.
Derivative transactions are carried out in accordance with the Companies’ internal
rules on transactions, and with highly rated financial institutions used as counterparties to reduce the risk of default.
Information regarding the method of hedge accounting, hedging instruments andhedged items, hedging policy, and assessment of hedge effectiveness is found in
Note 2-(n).
4539Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(a) Overview (continued)(3) Supplementary explanation of the fair value of financial instruments
Since variable factors are incorporated in the calculation of the fair value offinancial instruments, applying different assumptions may result in different fairvalues.
In addition, the amounts of derivatives in Note 13 “Derivatives and Hedge
Accounting” are not necessarily indicative of the actual market risk involved in thederivative transactions.
(b) Fair Value of Financial Instruments
Amounts recognized in the consolidated balance sheets, fair value, and the difference at
March 31, 2023 and 2022, were as shown below.
Carrying
value
Trade notes receivable,accounts receivable oncompleted construction
contracts and other
Securities and investments
in securities (*2)
Held-to-maturity
securities
Other securities
Total assets
Trade notes payable,accounts payable on
construction contracts
and other
Electronically recorded
payableShort-term bank loans
and current portion of
long-term debt
Corporate bonds
Long-term debt
Total liabilities
Derivative transactions (*3)

As of March 31, 2023
Fair
Carrying
Fair
Difference
Difference
value
value
value
(Millions of yen)(Thousands of U.S. dollars)¥215,220¥215,106¥(113)$1,611,772$1,610,918$ (846)

16,115

16,121

6

120,684

120,72944348
15,767354
15,767

6–

2,606
118,078

2,651
118,07844–¥231,335¥231,228¥(107)$1,732,457$1,731,655$ (801)¥ 84,771¥ 84,771¥–$ 634,846$634,846

36,15036,150–270,725

270,725–

10,812
10,00063,443

10,837
9,918
61,24624(81)(2,196)80,97074,889475,121

81,157
74,275
458,668

179(606)(16,445)¥205,177¥(40)¥202,924¥(40)¥(2,252)¥ –$1,536,561$(299)$1,519,688$(299)$(16,865)
$
–

$

–

(*1): Since “cash and deposits” are cash and deposits are settled in a short period of time, their fair value
approximates their book value. Therefore, information on “cash and deposits” is omitted.
(*2): Shares, etc. with no market value are not included in “Securities and investments in securities.” The
consolidated balance sheet amount of such financial instruments (unlisted stocks) was ¥4,090 million ($30,629
thousand).
(*3): Assets and liabilities arising from derivative transactions are shown at net value. If total is liabilities, amounts
is shown as “( ).”46

40

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(b) Fair Value of Financial Instruments (continued)

Trade notes receivable,accounts receivable oncompleted construction
contracts and other
Securities and investments
in securities (*2)
Held-to-maturity
securities
Other securities
Total assets
Trade notes payable,accounts payable on
construction contracts
and other
Electronically recorded
payableShort-term bank loans
and current portion of
long-term debt
Corporate bonds
Long-term debt
Total liabilities
Derivative transactions (*3)

As of March 31, 2022
Carrying
Fair
Difference
value
value
(Millions of yen)

¥197,169¥197,102¥ (67)

17,554

17,5562

209
17,345¥214,724

211
17,345¥214,6582–¥ (65)¥ 89,634¥ 89,634¥

29,347

29,347

–

1,988
5,000
57,806¥183,776¥ (133)

1,986
4,974
57,393¥183,336¥ (133)

(1)
(25)
(412)
¥(440)¥ ––(*1): Since “cash and deposits” are cash and deposits are settled in a short period of time, their fair value
approximates their book value. Therefore, information on “cash and deposits” is omitted.
(*2): Shares, etc. with no market value are not included in “Securities and investments in securities.” The
consolidated balance sheet amount of such financial instruments (unlisted stocks) was ¥4,095 million.
(*3): Assets and liabilities arising from derivative transactions are shown at net value. If total is liabilities, amounts
is shown as “( ).”47

41

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(b) Fair Value of Financial Instruments (continued)
Note 1:

The redemption schedule for monetary claims and held-to-maturity debt
securities with maturity dates subsequent to March 31, 2023 and 2022
As of March 31, 2023
Within1 yearDeposits¥ 65,106
Trade notes receivable,accounts receivable oncompleted construction
contracts and other
195,730
Securities and investments
in securities
Held-to-maturity
348
securities (bonds)¥261,185

Within1 yearDeposits¥ 70,947
Trade notes receivable,accounts receivable oncompleted construction
contracts and other
179,144
Securities and Investments
in securities
Held-to-maturity
147
securities (bonds)¥250,238

Note 2:OverOver
1 year
5 years
and within and within
5 years
10 years(Millions of yen)¥Over
10 yearsOverOver
1 year
5 years
Within and within and withinOver
5 years
10 years 10 years
1 year(Thousands of U.S. dollars)

–

¥–

¥–

$ 487,575 $

19,489

–

–

–

–

–

¥19,489¥–¥–

As of March 31, 2022
Over
Over
1 year
5 years
and within and within
5 years
10 years(Millions of yen)
¥

–

$–

$–

1,465,812

145,952

–

–

2,606

–

–

–

$1,956,002 $145,952

$–

$–

Over
10 years

–

¥–

¥–

18,025––62¥18,087

–
¥–

–
¥–

The redemption schedule for corporate bonds, long-term debt and otherinterest bearing debt with maturity dates subsequent to March 31, 2023 and2022. See Notes 21 and 22.

(c) Fair Value Information by Level within the Fair Value Hierarchy
The fair value of financial instruments is classified into the following three levels
according to the observability and materiality of inputs used to measure fair value.
Level 1 fair value:
Level 2 fair value:
Level 3 fair value:

Fair value measured using observable inputs, i.e. quoted
prices in active markets for assets or liabilities that are thesubject of the measurement.
Fair value measured using observable inputs other than Level
1 inputs.
Fair value measured using unobservable inputs.

If multiple inputs are used that are significant to the fair value measurement, the fair value
measurement is categorized in its entirety in the level of the lowest level input that issignificant to the entire measurement.
48

42

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(c) Fair Value Information by Level within the Fair Value Hierarchy (continued)(1) Financial assets and liabilities measured at fair value

Level 1
Securities andinvestments in securities
Other securities
Stock
Total assets
Derivative transactions
Hedge accounting isappliedTotal liabilities¥15,767¥15,767

¥ –
¥ –

¥–
¥–

¥15,767¥15,767$118,078$118,078

¥
¥

¥40
¥40

¥–
¥–

¥
¥

$
$

–
–

Level 1
Securities andinvestments in securities
Other securities
Stock
Total assets
Derivative transactions
Hedge accounting isappliedTotal liabilities

Level 2
Level 3
(Millions of yen)

As of March 31, 2023
Fair Value
Total
Level 1
Level 2
Level 3
Total
(Thousands of U.S. dollars)

As of March 31, 2022
Fair Value
Level 2
Level 3
(Millions of yen)

40
40

–
–

$–
$–

$118,078$118,078

$299
$299

$–
$–

$
$

299
299

Total

¥17,345¥17,345

¥ –
¥ –

¥–
¥–

¥17,345¥17,345

¥
¥

¥133
¥133

¥–
¥–

¥
¥

–
–

–
–

$
$

133
133

(2) Financial instruments other than those measured at fair value

Level 1
Trade notes receivable,accounts receivable oncompleted construction
contracts and other
Securities and investments
in securities
Held-to-maturity
securities
Bonds
Total assets
Trade notes payable,accounts payable on
construction contracts
and other
Electronically recorded
payableShort-term bank loans
and current portion of
long-term debt
Corporate bonds
Long-term debt
Total liabilities

Level 2
Level 3
(Millions of yen)

As of March 31, 2023
Fair Value
Total
Level 1
Level 2
Level 3(Thousands of U.S. dollars)

Total

¥ –

¥215,106¥–¥215,106$–$1,610,918$–$1,610,918

354
¥354

–
¥215,106–¥–354¥215,460

2,651$2,651–$1,610,918

–
$–

2,651
$1,613,569¥ –¥ 84,771¥–¥ 84,771$–$ 634,846$–$ 634,846–

36,150–36,150–270,725–

270,725–––¥ –10,837
9,918
61,246¥202,924–––¥–

10,837
9,918
61,246¥202,924–––$–

81,157
74,275
458,668$1,519,688

–
–
–
$–

81,157
74,275
458,668$1,519,688

49

43

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

Level 1
Trade notes receivable,accounts receivable oncompleted construction
contracts and other
Securities and investments
in securities
Held-to-maturity
securities
Bonds
Total assets
Trade notes payable,accounts payable on
construction contracts
and other
Electronically recorded
payableShort-term bank loans
and current portion of
long-term debt
Corporate bonds
Long-term debt
Total liabilities

Note 1:

As of March 31, 2022
Fair Value
Level 2
Level 3
(Millions of yen)

Total

¥ –

¥197,102¥–¥197,102

211
¥211

–
¥197,102–¥–

211¥197,313¥ –¥ 89,634¥–¥ 89,634–

29,347–

29,347

–
–
–
¥ –

1,986
4,974
57,393¥183,336

–
–
–
¥–

1,986
4,974
57,393¥183,336

Description of the valuation techniques and inputs used in the fair value
measurements

Securities and investments in securities
Listed stocks and bonds are valued using quoted market prices. Since listed stocks andbonds are traded in active markets, their fair value is classified as Level 1 fair value.
Trade notes receivable, accounts receivable on completed construction contracts andother
The fair value of these receivables is calculated for each receivable classified by acertain period using the discounted present value method based on the amount of thereceivables, the period to maturity, and an interest rate that takes into account credit risk,
and is classified as Level 2 fair value.
Trade notes payable, accounts payable on construction contracts and other, andelectronically recorded payable
The fair value of these payables is based on their book value as most of them are settled
within one year, and is classified as Level 2 fair value.
Short-term bank loans and current portion of long-term debt
For the current portion of long-term debt, the fair value is calculated in the same manner
as for long-term debt. Since other short-term bank loans are settled in a short period oftime, their fair value is almost equal to their book value, and is therefore classified as
Level 2 fair value.

50

44

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(c) Fair Value Information by Level within the Fair Value Hierarchy (continued)
Corporate bonds
The fair value of bonds issued by the Company is calculated by discounting the total
amount of principal and interest at an interest rate that takes into account the remaining
term of the bonds and credit risk. The fair value of bonds is classified as Level 2 fairvalue because they have a quoted market price but are not traded in an active market.
Long-term debt
The fair value of long-term debt is calculated based on the present value of the total
principal and interest discounted at the interest rate that would be applicable to a newsimilar borrowing, and is classified as Level 2 fair value. The fair value of long-term
debt with floating interest rates that is subject to the short-cut method is calculated bydiscounting the total amount of principal and interest treated together with the interest
rate swaps by the reasonably estimated interest rate that would be applicable to a newsimilar borrowing.
Derivative transactions
The fair value of interest rate swaps is based on the price quoted by the counterparty
financial institutions and is classified as Level 2 fair value. The fair value of interest rate
swaps accounted for using the short-cut method is included in the fair value of therelevant long-term debt because they are accounted for as an integral part of the longterm debt that is hedged.

51

45

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

12. Securities
Securities at March 31, 2023 and 2022 were summarized as follows:(a) Held-to-maturity Securities
Carrying
value
Securities whose fairvalue exceeds theircarrying value:
Bonds

Securities whose fairvalue exceeds theircarrying value:
Bonds

As of March 31, 2023
Fair
Unrealized Carrying
Fair
Unrealized
value
gain
value
value
gain
(Millions of yen)(Thousands of U.S. dollars)

¥348

¥354

¥6

$2,606$2,651$44

As of March 31, 2022
Fair
Unrealized
Carrying
gain
value
value
(Millions of yen)

¥209

¥211

¥2

(b) Other Securities
Balancesheet
amountUnrealized gain:
Stock
Unrealized loss:
Stock
Total

Unrealized gain:
Stock
Unrealized loss:
Stock
Total

As of March 31, 2023
Balancesheet
Unrealized
Unrealized
amountgain (loss)
gain (loss)
Cost
Cost
(Millions of yen)(Thousands of U.S. dollars)¥ 4,078¥ 2,425¥1,652$ 30,539$ 18,160$12,371

11,689¥15,767

15,511¥17,936(3,822)¥(2,169)

87,538$118,078

116,161$134,321(28,622)$(16,243)

As of March 31, 2022
Balancesheet
Unrealized
amountgain (loss)
Cost(Millions of yen)
¥ 4,118¥ 2,339¥1,77813,226¥17,345

15,789¥18,129(2,562)¥ (784)(c) Sales of Other Securities
Year ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Sales proceeds
Total gain on sales of security
Total loss on sales of security

¥388
187
(6)

¥302
19
–

$2,905
1,400
(44)

52

46

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

13. Derivatives and Hedge Accounting
Derivative transactions for the years ended March 31, 2023 and 2022 were summarized asfollows:(a) Derivative Transactions to which the Hedge Accounting is Applied(1) Currency-related transactions
For the year ended March 31, 2023
Not applicable.
For the year ended March 31, 2022
Not applicable.
(2) Interest-related transactions
Method ofhedge
accounting
Fair value

Total

Method ofhedge
accounting
Short-cut
method

Total
Note:

As of March 31, 2023
Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating
Pay fixed/
Receivefloating

Long-termdebtLong-term
debt

ContractOver
Fairamount1 yearvalue(Millions of yen)Contract
Over
Fair value
amount1 year(Thousands of U.S. dollars)¥ 7,500¥–¥ (20)$56,167$–$ (149)2,500¥10,000

2,500¥ 2,500

(19)
¥(40)

18,722$74,889

18,722$18,722(142)$(299)

As of March 31, 2023
Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating
Pay fixed/
Receivefloating

Long-termdebtLong-term
debt

ContractOver
Fairamount1 yearvalue(Millions of yen)Contract
Over
Fair value
amount1 year(Thousands of U.S. dollars)¥ 6,000¥ 6,000(Note)$44,933$44,933(Note)

4,000¥10,000

4,000¥10,000(Note)

29,955$74,889

29,955$74,889(Note)

Since these interest rate swaps accounted for by short-cut method are included in that of the long-term debt
as the hedged item, the fair values of the contracts are included in the long-term debt.

53

47

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(a) Derivative Transactions to which the Hedge Accounting is Applied (continued)
Method ofhedge
accounting
Fair value

Total

Method ofhedge
accounting
Short-cut
method

Total
Note:

As of March 31, 2022
Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating
Pay fixed/
Receivefloating

Long-termdebtLong-term
debt

ContractOver
Fairamount1 yearvalue(Millions of yen)

¥ 7,500¥ 7,500

¥(56)

2,500
¥10,000

2,500¥10,000(77)¥(133)

As of March 31, 2022
Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating
Pay fixed/
Receivefloating

Long-termdebtLong-term
debt

ContractOver
Fairamount1 yearvalue(Millions of yen)

¥ 6,000¥ 6,000(Note)

4,000¥10,000

4,000¥10,000(Note)

Since these interest rate swaps accounted for by short-cut method are included in that of the long-term debt
as the hedged item, the fair values of the contracts are included in the long-term debt.

54

48

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

14.

Retirement Benefit Plans

For the year ended March 31, 2023, the Group has either funded or unfunded defined benefit
and defined contribution plans.
The Group has a defined benefits pension plan, i.e. defined benefit company pension plan
and lump-sum retirement benefit plans. Certain consolidated domestic subsidiaries participate
in the Small and Medium Enterprise Retirement Allowance Mutual Aid Scheme. Certain
foreign consolidated subsidiaries have an employee pension trust. The Company and certain
consolidated subsidiaries have a defined contribution pension plan.
In addition, for certain defined benefit company pension plan and lump-sum retirement benefit
plans and the defined contribution pension plan of the Company and certain consolidated
subsidiaries, the simplified method is applied to calculate their liability for retirement benefits
and retirement benefits expenses.
The changes in the retirement benefit obligation during the years ended March 31, 2023 and2022 were as follows (excluding plans for which the simplified method is applied):Year ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Balance at the beginning of year
Service cost
Interest cost
Actuarial loss
Retirement benefit paid
Foreign currency translation
Other
Balance at the end of year

¥16,845898
84
26(1,575)22(6)¥16,294¥17,022878
81
32(1,197)30(3)¥16,845$126,151
6,725
629
194
(11,795)
164(44)$122,025

The changes in plan assets during the years ended March 31, 2023 and 2022 were as follows(excluding plans for which the simplified method is applied):Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Balance at the beginning of year
Expected return on plan assets
Actuarial loss
Contribution of the employer
Retirement benefit paid
Foreign currency translation
Balance at the end of year

¥511
12
(27)
18
(46)
2
¥470

¥517
0
(2)
18
(24)
1
¥511

$3,826
89
(202)
134
(344)
14
$3,51955

49

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

14. Retirement Benefit Plans (continued)
The changes in liability for retirement benefits based on the simplified method during theyears ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Balance at the beginning of year
Retirement benefit expense
Retirement benefit paid
Contribution to defined contribution plan
Balance at the end of year

¥1,928
226
(75)
(19)
¥2,059¥1,896
253
(201)
(19)
¥1,928$14,438
1,692
(561)
(142)
$15,419

A reconciliation of the funded retirement benefit obligation and plan assets and the net
liability for retirement benefits recognized in the consolidated balance sheet at March 31,
2023 and 2022 is as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Net liability for retirement benefits in the
consolidated balance sheet
Liability for retirement benefits
Assets for retirement benefits
Net liability for retirement benefits in the
consolidated balance sheet¥ 1,560(1,405)155
17,727¥ 1,633(1,526)106
18,155$ 11,682(10,521)1,160
132,756

17,882

18,262

133,917

17,971(88)

18,389(127)

134,583(659)¥17,882¥18,262$133,917

Note: Including plans for which the simplified method is applied.

56

50

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

14. Retirement Benefit Plans (continued)
The components of retirement benefit expense during the years ended March 31, 2023 and2022 were as follows:Year ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Retirement benefit expense calculated by thesimplified method
Total retirement benefit expense

¥ 898
84
(12)
260
(121)

¥ 878
81
(0)
379
(362)

$ 6,725
629
(89)
1,947
(906)

226
¥1,335253¥1,230

1,692$9,997The components of retirement benefit liability adjustments included in other comprehensive
income (before tax effect) during the years ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Actuarial loss
Prior service cost
Total

¥206
(122)
¥ 83

¥344
(362)
¥ (17)$1,542(913)$ 621

The components of retirement benefit liability adjustments included in accumulated othercomprehensive income (before tax effect) as of March 31, 2023 and 2022 were follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Unrecognized actuarial loss
Unrecognized prior service cost
Total

¥862
(21)
¥ 841

¥1,068(143)¥ 925$6,455(157)$6,29857

51

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

14. Retirement Benefit Plans (continued)
The fair value of plan assets, by major category, as a percentage of total plan assets as ofMarch 31, 2023 and 2022 were follows:
2023
Bonds
StocksOther
Total

As of March 31,

78%
11%
11%
100%

2022
89%
5%
6%
100%

The expected return on plan assets has been estimated based on the anticipated allocation toeach asset class and the expected long-term returns on assets held in each category.
The principal assumptions used for above plans were as follows:
Years ended March 31,
2023
2022
Discount rate
Expected rate of return on plan assets
Expected rate of increase in salaries

Principally 0.3%
Principally 0.9%
Principally 4.9%

Principally 0.3%
Principally 0.7%
Principally 4.8%

The contribution to defined contribution plans in the company and consolidated subsidiaries
were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Contribution to defined contribution plans

¥764

¥768

$5,721

58

52

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

15. Income Taxes
The significant components of deferred tax assets and liabilities at March 31, 2023 and 2022
were as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Liability for retirement benefits
Accounts payable and accrued expenses
Impairment loss
Loss on valuation of investment securities
Allowance for losses on construction
contracts
Provision for contingent loss
Other
Gross deferred tax assets
Valuation allowance (Note)
Total deferred tax assets¥ 5,506
2,571
84
8¥5,631
3,201
65
249

$41,234
19,254629
59

13,869661
2,286
24,989(17,963)
7,025

6,608
661
1,626
18,043(6,336)
11,706

103,864
4,950
17,119187,141(134,524)
52,609

(961)
(0)
(393)
(271)
(1,627)¥5,397

(970)
(2)
(453)
(58)
(1,485)¥10,221(7,196)(0)(2,943)(2,029)(12,184)$40,417

Deferred tax liabilities:
Retained earnings of foreign consolidated
subsidiaries
Unrealized holding gain on securities
Unrealized gain on business combinations
Other
Total deferred tax liabilities
Net deferred tax assets

Note: Valuation allowance increased by ¥11,626 million ($87,066 thousand). The main
reason for this increase was the reversal of deferred tax assets due to a review of therecoverability of deferred tax assets.
The significant differences between the statutory tax rates and the effective tax rates
The note is omitted due to the posting of loss before income taxes for the years ended March
31, 2023 and 2022.
The accounting treatment of corporate and local income taxes, and related tax effectaccounting
The Company and some of its domestic consolidated subsidiaries have adopted the group tax
sharing system from the current consolidated fiscal year. In addition, the Company conducts
accounting treatment and disclosure of corporate and local income taxes, and related tax
effect accounting in accordance with the “Practical Solution on the Accounting andDisclosure Under the Group Tax Sharing System” (ASBJ PITF No. 42 issued on August 12,2021).
59

53

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

16.

Revenue Recognition(a) Disaggregation of Revenue from Contracts with Customers
Information on the disaggregation of revenue from contracts with customers is presented in“17. Segment Information, etc.”(b) Useful Information in Understanding Revenue from Contracts with Customers
The Group is primarily engaged in civil construction and building construction, providing
construction design and construction work services as well as other related services to its
domestic and overseas customers.
In civil and building construction, the Group primarily enters into long-term construction
contracts. For such contracts, the completion and delivery of construction work is identified
as a performance obligation. Performance obligations are deemed to be satisfied over time,and revenue is recognized based on progress toward complete satisfaction of a performanceobligation. The progress toward complete satisfaction of a performance obligation ismeasured based on the proportion of construction costs incurred by the end of the reporting
period to the total expected construction costs. When the progress toward complete
satisfaction of a performance obligation cannot be reasonably measured, but the costs to be
incurred are expected to be recovered, revenue is recognized only to the extent of the costs
incurred, except for those contracts that are in the initial stages of construction. For
construction contracts whose period between the date of commencement of the transaction
and the point in time when the performance obligation is expected to be fully satisfied is very
short, an alternative treatment is applied, whereby revenue is not recognized over time, but
is recognized when the performance obligation is fully satisfied.
Some construction contracts include variable consideration as they contain sliding clauses(overall sliding, single item sliding, or inflationary sliding) or clauses related to penalties fordelays in construction. Variable consideration is estimated using the mode method based oncontract terms and past performance.
Consideration for transactions related to construction contracts is generally received withinapproximately one year after the performance obligation is satisfied (in some cases, advancepayments are received based on the contract). However, when the period between thesatisfaction of the performance obligation and the customer’s payment of the consideration
is expected to be long, and the related market interest rate is expected to be considerably highand the impact on the financial component is expected to be significant, then the receivables
are considered to contain a significant financial component. The financial component of thereceivables based on the contract with the customer is adjusted accordingly.
(c) Balance of Contract Assets and Liabilities and the Transaction Price Allocated to the
Remaining Performance Obligations

60

54

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

For the year ended March 31, 2023
(1) Balances of contract assets and contract liabilities
Year ended March 31,

2023

Receivables from contracts with customers(beginning balance) (Note)
Receivables from contracts with customers(ending balance) (Note)
Contract assets (beginning balance)
Contract assets (ending balance)
Contract liabilities (beginning balance)
Contract liabilities (ending balance)(Millions of yen)(Thousands of
U.S. dollars)¥81,419$609,743

90,777

679,824

115,750
124,443
28,63535,262866,846
931,947
214,446
264,075

Note: Receivables from contracts with customers are included in the amount of accounts
receivable on completed construction contracts and other for the year ended March 31,
2022, however, they are included in the amount of trade notes receivable, accounts
receivable on completed construction contracts and other for the year ended March 31,
2023. Therefore, in the year ended March 31, 2022, the Company reclassified
receivables from contracts with customers.

Contract assets relate to the rights of the Group to consideration for the completion anddelivery of construction contracts with customers that have been completed but unbilled
as of the end of the fiscal year. Contract assets are reclassified to receivables fromcontracts with customers when the Group’s rights to the consideration become
unconditional. Consideration for such construction is billed and received in accordancewith the payment terms of the construction contracts.
Contract liabilities mainly relate to advances received from customers in accordancewith the payment clauses of construction contracts. The contract liabilities are reversed
upon recognition of revenue.
The portion of revenue recognized in the current fiscal year and included in the
beginning balance of contract liabilities amounted to ¥24,777 million ($185,553
thousand)The amount of revenue recognized in the current fiscal year from performanceobligations that were satisfied (or partially satisfied) in prior years was ¥4,763 million($35,669 thousand).
(2) Transaction price allocated to the remaining performance obligations
The total transaction price allocated to the remaining performance obligations as ofMarch 31, 2023 amounted to ¥829,681 million ($6,213,442 thousand).
The transaction price allocated to the remaining performance obligations represents theaggregate amount of the transaction price of contracts for which the Group has been
awarded as of the end of the current fiscal year, but for which no revenue is recognizedbecause the performance obligations have not been satisfied as of that date. The Group
expects to recognize revenue from such transaction prices within approximately two
years as performance obligations are satisfied.
61

55

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

For the year ended March 31, 2022
(1) Balances of contract assets and contract liabilities
Year ended March 31,

2022(Millions of yen)
Receivables from contracts with customers(beginning balance)
Receivables from contracts with customers(ending balance)
Contract assets (beginning balance)
Contract assets (ending balance)
Contract liabilities (beginning balance)
Contract liabilities (ending balance)¥75,046
81,419117,681
115,750
24,091
28,635Contract assets relate to the rights of the Group to consideration for the completion anddelivery of construction contracts with customers that have been completed but unbilled
as of the end of the fiscal year. Contract assets are reclassified to receivables fromcontracts with customers when the Group’s rights to the consideration become
unconditional. Consideration for such construction is billed and received in accordancewith the payment terms of the construction contracts.
Contract liabilities mainly relate to advances received from customers in accordancewith the payment clauses of construction contracts. The contract liabilities are reversed
upon recognition of revenue.
The portion of revenue recognized in the current fiscal year and included in the
beginning balance of contract liabilities amounted to ¥20,350 million.
The amount of revenue recognized in the current fiscal year from performanceobligations that were satisfied (or partially satisfied) in prior years was ¥3,889 million.
(2) Transaction price allocated to the remaining performance obligations
The total transaction price allocated to the remaining performance obligations as ofMarch 31, 2022 amounted to ¥836,011 million.
The transaction price allocated to the remaining performance obligations represents theaggregate amount of the transaction price of contracts for which the Group has been
awarded as of the end of the current fiscal year, but for which no revenue is recognizedbecause the performance obligations have not been satisfied as of that date. The Group
expects to recognize revenue from such transaction prices within approximately two
years as performance obligations are satisfied.

62

56

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

17. Segment Information, etc.
Segment Information(a) Outline of Segments
The Company’s reportable operating segments are components for which separate
financial information is available and that are evaluated regularly by the board of directors
in determining the allocation of management resources and in assessing performance.
The Company currently divides its operations into Civil Construction and Building
Construction, managed by the Civil Engineering Division and the Building Administration
Division, respectively. Business strategies are formulated by each segment.
Accordingly, the Company divides its operations into two reportable operating segmentson the same basis as it uses internally; Civil Construction and Building Construction.
Civil Construction consists mainly of governmental public works like bridge construction.
Building Construction is awarded by private sector companies for things like high riseapartment buildings.
(b) Accounting Methods Used to Calculate Segment Income (Loss), Segment Assets andOther Items for Reportable Segments
Accounts for reportable segments are for the most part calculated in line with thegenerally accepted standards used for the preparation of the consolidated financial
statements.
Segment income (loss) for reportable segments is based on gross profit.
Amounts for intersegment transactions or transfers are based on the market prices
determined by third party transactions.
The Company does not allocate any assets to reportable operating segments.

63

57

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

(c) Segment income, segment assets and other items for reportable segments

Sales
Externalcustomers
Intersegment
transactions ortransfers
Net sales
Segment income(loss)

Sales
Externalcustomers
Intersegment
transactions ortransfers
Net sales
Segment income(loss)

Year ended March 31, 2023
Reportable operating segments
OthersBuilding
Total(Note 1)
Total
Civil
(Millions of yen)

Adjustments Consolidated(Note 2)
(Note 3)¥220,471¥237,662¥458,134¥488¥458,622¥–¥458,622

1,430¥221,902

9¥237,671

1,439¥459,574

142
¥630

1,581
¥460,204(1,581)¥(1,581)–¥458,622¥ 29,003¥ (20,058)¥ 8,945¥213¥ 9,159¥ (89)¥ 9,069

Year ended March 31, 2023
Reportable operating segments
OthersBuilding
Total(Note 1)
Total
Civil
(Thousands of U.S. dollars)

Adjustments Consolidated(Note 2)
(Note 3)

$1,651,097$1,779,839$3,430,944$3,654$3,434,598$–$3,434,598

10,709$1,661,813

67$1,779,907

10,776$3,441,728

1,063$4,718

11,840$3,446,446(11,840)$(11,840)–$3,434,598$ 217,202$ (150,213) $$1,595$$ (666)$

66,98868,591

67,917Note 1:“Others” which includes the Company’s business of solar power and insurance agent, does not qualify asa reportable operating segment.

Note 2:Adjustment for segment income (loss) is the reduction of income recognized between reportable operating
segments.

Note 3:

Segment income (loss) corresponds to gross profit in the consolidated statement of income.

Sales
Externalcustomers
Intersegment
transactions ortransfers
Net sales
Segment income(loss)

Year ended March 31, 2022
Reportable operating segments
Others
Civil
Building
Total(Note 1)
Total
(Millions of yen)

Adjustments Consolidated(Note 2)
(Note 3)¥191,446¥211,063¥402,510¥765¥403,275¥–¥403,275

680¥192,127－¥211,063

680¥403,190

146
¥912

827
¥404,103(827)¥(827)–¥403,275¥ 24,589¥ (6,470)¥ 18,119¥119¥ 18,239¥ (60)¥ 18,178

Note 1:“Others” which includes the Company’s business of solar power, elder care facilities and insurance agent,
does not qualify as a reportable operating segment.

Note 2:Adjustment for segment income (loss) is the reduction of income recognized between reportable operating
segments.

Note 3:

Segment income (loss) corresponds to gross profit in the consolidated statement of income.

64

58

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(d) Information on Disaggregation of Revenue by Reportable Segment

Japan
Asia
Others
Revenue from contracts
with customers
Other revenue
Sales to externalcustomers

Japan
Asia
Others
Revenue from contracts
with customers
Other revenue
Sales to externalcustomers
Note:

Total
¥365,536
87,025
5,685
458,247

164

210

374

－

374

¥220,471¥237,662¥458,134¥488¥458,622

Year ended March 31, 2023
Reportable operating segments
Others
Civil
Building
Total(Note)(Thousands of U.S. dollars)$1,260,061 $1,474,275 $2,734,344$3,137377,787
273,421651,209509
12,01230,562
42,574－
1,649,868
1,778,267
3,428,135
3,654

Total
$2,737,482
651,726
42,574
3,431,790

1,228

1,572

2,800

－

2,800

$1,651,097$1,779,839$3,430,944$3,654$3,434,598“Others” which includes the Company’s business of solar power and insurance agent, does not qualify asa reportable operating segment.

Japan
Asia
Others
Revenue from contracts
with customers
Other revenue
Sales to externalcustomers
Note:Year ended March 31, 2023
Reportable operating segments
OthersBuilding
Total(Note)
Civil(Millions of yen)
¥168,256¥196,860¥365,117¥419
50,44636,51086,956
68
4,081
5,685
－
1,604
220,307237,452
457,759
488

Year ended March 31, 2022
Reportable operating segments
Others
Civil
Building
Total(Note)(Millions of yen)
¥150,737¥182,532¥333,269¥551
39,63925,11064,750
213
3,204
4,117
－
912
191,289
210,847
402,137
765

Total¥333,821
64,963
4,117
402,902

156

215

372

－

372

¥191,446¥211,063¥402,510¥765¥403,275“Others” which includes the Company’s business of solar power and insurance agent, does not qualify asa reportable operating segment.

65

59

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

Related Information
For the year ended March 31, 2023
(a) Product and Service Information
See “Segment income, segment assets and other items for reportable segments.”(b) Geographical Segment Information(1) Sales
Japan

Asia
Others(Millions of yen)

¥365,911
Note:¥87,025

Year ended March 31, 2023
Total
Japan
Asia
Others
Total(Thousands of U.S. dollars)¥5,685¥458,622$2,740,290 $651,726$42,574$3,434,598

Geographical segments are determined based on the country/region of domicile ofcustomers.

(2) Property and equipment
Japan

Year ended March 31, 2023
Asia
Others
Total
Japan
Asia
Others
Total(Millions of yen)(Thousands of U.S. dollars)¥31,335¥4,981¥159¥36,476$234,666$37,302$1,190$273,167

Note 1: Countries and regions are classified according to geographical proximity.
Note 2: Asia includes Singapore, amounting to ¥4,167 million ($31,206 thousand).

(c) Major Customer Information
Information on major customers has been omitted as there were no sales to a single
customer constituting over 10% of net sales for the year ended March 31, 2023.
For the year ended March 31, 2022
(a) Product and Service Information
See “Segment income, segment assets and other items for reportable segments.”(b) Geographical Segment Information(1) SalesYear ended March 31, 2022
Japan

Asia

Others

Total(Millions of yen)
¥334,194¥64,963¥4,117¥403,275

Notes: Geographical segments are determined based on the country/region of domicile ofcustomers.

66

60

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(b) Geographical Segment Information (continued)(2) Property and equipment
Japan¥29,245

Year ended March 31, 2022
Asia
Others
Total(Millions of yen)
¥4,645¥149¥34,040

Note 1: Countries and regions are classified according to geographical proximity.
Note 2: Asia includes Singapore, amounting to ¥3,848 million.

(c) Major Customer Information
Information on major customers has been omitted as there were no sales to a single
customer constituting over 10% of net sales for the year ended March 31, 2022.
Losses on impairment by reportable segment

Total

Losses on impairment

Year ended March 31, 2023
Reportable operating segments
Others
Civil
Building
Total(Note)(Millions of yen)
¥62
¥－
¥62
¥－

Total

Losses on impairment

Year ended March 31, 2023
Reportable operating segments
Others
Civil
Building
Total(Note)(Thousands of U.S. dollars)
$464
$－
$464
$－

¥62

$464

For the year ended March 31, 2022, there were no losses on impairment by reportablesegment.
Amortization of goodwill and unamortized balance by reportable segment

Amortization for the year
Balance at the end of the year

Year ended March 31, 2023
Reportable operating segments
Others
Civil
Building
Total(Note)(Millions of yen)
¥405
¥－
¥405
¥－
2,838
－
2,838
－

Amortization for the year
Balance at the end of the year

Year ended March 31, 2023
Reportable operating segments
OthersBuilding
Total(Note)
Civil(Thousands of U.S. dollars)$3,033$－$3,033$－
21,253－
21,253－

Amortization for the year
Balance at the end of the year

Year ended March 31, 2022
Reportable operating segments
Others
Civil
Building
Total(Note)(Millions of yen)
¥－
¥－
¥－
¥－
2,919
－
2,919
－

Total
¥405
2,838

Total
$3,033
21,253

Total
¥－
2,919

67

61

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023(c) Major Customer Information (continued)
Gain on negative goodwill by reportable segment
For the years ended March 31, 2023 and 2022, there were no gain on negative goodwill byreportable segment.
18. Related Party Transactions
Related party transaction
There were no transactions with affiliates for the year ended March 31, 2023.
Transactions with affiliates for the year ended March 31, 2022 were summarized as follows:

Affiliated company:
Yoshiikikaku Co., Ltd.
(Real estate business)

Note 1:
Note 2:

Capitalinvestment

Number of
voting shares
held as apercentage ofvoting sharesissued¥1030.0%Year ended March 31, 2022

Nature ofTotal amounttransactionof transaction(Millions of yen)
Long-term
non-operating
accounts
receivable
Long-term
accounts
payableBalance sheet
account

Long-term
non-operating
accounts
receivable
Long-term
accounts
payable¥–¥–Balance at
March 31,2022

¥2,918¥2,339Total amount of transaction represents the amount of a claim for damage from Yoshiikikaku Co., Ltd. and theamount of guarantee for financial institutions.
Allowance for the above long-term non-operating accounts receivable was recognized in the amount of ¥2,889
million.

19. Per Share Information
Net assets and basic loss per share as of and for the years ended March 31, 2023 and 2022
were as follows:
2023

2022
(Yen)

Net assets per share
Loss per share¥406.53(164.32)¥584.73(44.93)2023(U.S. dollars)$3.04(1.231)

Note: For the years ended March 31, 2023 and 2022, Profit per share – diluted was omitted
as loss per share was recorded and there were no diluted shares.

68

62

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

19. Per Share Information (continued)
The basis of calculation for net assets per share at March 31, 2023 and 2022 were as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Total net assets
Amounts deducted from total net assets[Including non-controlling interests]
Total net assets attributable to common stock¥71,137
7,519[7,519]¥63,618¥99,701
8,313[8,313]¥91,388$532,741
56,309[56,309]$476,432(Thousands of shares)

Number of shares of common stock used todetermine net assets per share

156,492

156,290

The basis for calculating basic loss per share for the years ended March 31, 2023 and 2022
were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Loss per share – basic:
Loss attributable to owners of parent
Amount not available to common shareholders
Loss attributable to owners of parent
per share – basic
Average number of shares of common stock
outstanding¥(25,702)–¥(7,022)–$(192,481)–¥(25,702)¥(7,022)$(192,481)(Thousands of shares)
156,420

156,284

69

63

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

20. Subsequent Event
Not applicable.
21. Corporate Bond
Corporate bonds at March 31, 2023 was summarized as follows:

Bond

Company

The Company
The Company

1st Unsecured Bond
(with inter-bond paripassu clause)
2nd Unsecured Bond
(with inter-bond paripassu clause)

–

Total

The Company
The Company

1st Unsecured Bond
(with inter-bond paripassu clause)
2nd Unsecured Bond
(with inter-bond paripassu clause)–

Redemption
Deadline

October 22,
2020

5,000

5,000

0.30%

Nil

October 22,
2025

June 14,
2022

–

5,000

0.52%

Nil

June 14,
2027

5,000

10,000––––Year ended March 31, 2023
Balance at Balance atApril 1,March 31, Interest
Collateral
Rate
2021
2022
(Thousands of U.S.
dollars)

IssuedDate

BondCompany

Total

Year ended March 31, 2023
Balance at Balance atApril 1,March 31, Interest
Issued Date
Collateral
Rate
2022
2023
(Millions of yen)

Redemption
Deadline

October22, 2020

37,44437,4440.30%

Nil

October 22,
2025

June 14,2022–

37,4440.52%

NilJune 14,2027

37,44474,889––––

Scheduled redemption of corporate bonds are summarized as follows:Year ended March 31, 2023
Within 1 year
Over 1 year and within 2 years
Over 2 years and within 3 years
Over 3 years and within 4 years
Over 4 years and within 5 years(Millions of yen)(Thousands of U.S.
dollars)

¥–
–
5,000
–
5,000

$–
–
37,444–37,44470

64

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

22. Short-Term Debt and Long-Term Debt
Short-term debt at March 31, 2023 and 2022 were summarized as follows:

Short-term bank loans (at weighted-averageinterest rates of 4.4% at 2023 and 3.3% at 2022)
Deposits from employees (at interest rates of
1.0% at 2023 and 2022)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
¥ 150
¥276
$ 1,123¥4,305¥4,157$32,239

Long-term debt at March 31, 2023 and 2022 were summarized as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Debt with collateral (at weighted-average interest
rates of 2.5% at 2023 and 2022)
Debt without collateral (at weighted-averageinterest rates of 1.2% at 2023 and 2022)
Lease obligations
Current portion (excluding lease obligations)
Current portion of lease obligations

¥56

¥68

$419

74,0502,563(10,662)(749)

59,4502,670(1,712)(781)

554,557
19,194(79,847)(5,609)The aggregate annual maturities of long-term debt subsequent to March 31, 2023 weresummarized as follows:Year ending March 31,
2024
2025
2026
2027
2028
2029 and thereafter(Millions ofyen)(Thousands of
U.S. dollars)¥10,662
20,912
6,813
14,21314,003
7,500¥74,106$ 79,847
156,609
51,022
106,440
104,867
56,167$554,976

71

65

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2023

22. Short-Term Debt and Long-Term Debt (continued)
The aggregate annual maturities of lease obligations subsequent to March 31, 2023 weresummarized as follows:Year ending March 31,
2024
2025
2026
2027
2028
2029 and thereafter(Millions ofyen)(Thousands of
U.S. dollars)

¥ 749
585
349
284
144
449
¥2,563$ 5,609
4,381
2,613
2,126
1,078
3,362
$19,194

72

66

Independent Auditor’s Report

The Board of Directors
Sumitomo Mitsui Construction Co., Ltd.
OpinionWe have audited the accompanying consolidated financial statements of Sumitomo Mitsui
Construction Co., Ltd. and its consolidated subsidiaries (the Group), which comprise theconsolidated balance sheet as at March 31, 2023, and the consolidated statements of income,comprehensive income, changes in net assets, and cash flows for the year then ended, and notes
to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2023, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the consolidated financial statements as a whole, and informing the auditor’s opinion thereon, and we do not provide a separate opinion on thesematters.

73

Estimates of total construction costs under the method of recognizing revenue as performanceobligations are satisfied over time
Description of Key Audit Matter

Auditor’s Response

Sumitomo Mitsui Construction Co., Ltd. (theWe mainly performed the following procedures toCompany) and its consolidated subsidiaries are evaluate the reasonableness of estimates of total
engaged in the civil construction business and construction costs under the method of recognizing
building construction business, as well as other revenue as performance obligations are satisfied
businesses related to thereto. As described in “(m) over time.
Recognition of Revenues and Costs” of “2. (1) Assessment of internal controls
Summary of Significant Accounting Policies” In considering the system for estimating total
under Notes to Consolidated Financial Statements, construction costs, we obtained an understanding
in recording net sales (net sales on construction of the Company’s company-level internal controls
contracts) and cost of sales (cost of sales of and evaluated the design and performance ofcompleted construction contracts), the Company internal controls related to approval of operating
and its consolidated subsidiaries mainly use the budgets, which serve as the basis for estimates ofmethod of recognizing revenue as performance total construction costs, and verification of final
obligations are satisfied over time (cost-based expected profit (loss) on construction.
input method is applied for estimates of progress (2) Evaluation of the reasonableness of estimates
towards satisfaction of the performance obligation) of total construction costs
for construction that is deemed to satisfy We mainly performed the following procedures for
performance obligations for the portion of work material construction works, construction works
completed up to the end of the fiscal year ended with other characteristics, and construction works
March 31, 2023. Additionally, as described in “(b). extracted by sampling method, including largeRecognition of Revenues from Construction scale building construction in Japan in which
Contracts”

of

“4.

Significant

Accounting significant losses were recorded in the fiscal year

Estimates” under Notes to Consolidated Financial ended March 31, 2023.
Statements, net sales of 403,453 million yen were࣭ We

recorded using the method of recognizing revenue

procedures to evaluate the reasonableness ofas performance obligations are satisfied over time

total construction costs estimated in initialinoperating budgets.

theconsolidated

financialstatements,

accounting for approximately 88% of net sales of-Wemainlyperformed

considered

whetherthefollowing

constructiondifficulty, specialized construction methods,

74

458,622 million yen for the fiscal year ended

and instructions from ordering parties were

March 31, 2023.

reflected in estimates of costs for each type of

Revenue recognition using the method ofwork in initial operating budgets by inspecting

recognizing revenue as performance obligations

overviews of construction projects, floor plans,

are satisfied over time is measured based on theand architectural renderings and making

progress

inquiries

towards

thesatisfaction

of

the

of

managers

inconstruction

performance obligation, and such progress ismanagement departments.

determined based on the ratio of actual incurred-We considered whether total construction

costs up to the end of the fiscal year to total

costs

construction costs.

construction

Considering that construction is very individual

schedules and making inquiries of managers ininconstruction management departments.

nature

and

made

in

accordance

with

are

estimated
plans

based
by

on

realistic

inspecting

workfundamental specifications and work details-We considered estimates of total construction

instructed by customers, it is difficult to apply acosts by each individual cost type by

uniform rule for making determinations incomparing such costs to budgets prepared uponestimating such amounts. Accordingly, estimatesorder receipt, making inquiries of managers inof total construction costs are based on certain

construction management departments, andassumptions and determinations, and are subject toreconciling, as necessary, costs to quotations

uncertainty. Further, given that construction workfrom subcontractors.

generally spans long periods of time, unanticipated࣭ We

costs may arise in line with changes in work details

procedures to evaluate the reasonableness ofdue to unforeseen changes in social, economic, andtotal construction costs estimated at fiscal year-

political conditions overseas, natural disasters,

end.

certain facts coming to light after the start of-We considered whether there are any future

construction, and changes in conditions atconcerns about matters such as construction

construction sites, thus making timely andperiod extensions and inflation, and whether

appropriate revisions of total construction costs

suchcomplex.

construction costs by inspecting materials used

Based on the above, we have determined that
estimates of total construction costs made incalculating construction revenue and progress
towards satisfaction of the performanceobligation are of particular significance in thecurrent period and, accordingly, that
estimates of total construction costs under theto calculate total construction costs and making

75

mainlyconcerns

inquiriesofperformed

are

the

reflected

managersinfollowing

in

total

construction

management departments.
-We considered whether current construction
details deviate from the status of costs incurredmethod of recognizing revenue as
performance obligations are satisfied overtime is a key audit matter.

and whether such deviations are reflected in
total

construction

construction

costs

by

management

inspecting
materials,

comparing these materials to work schedules,
making inquiries of managers in construction
management departments, and reconciling, as
necessary, these materials to quotations fromsubcontractors.
-We performed on-site observations for a
portion of construction projects and considered
whether the actual status of construction work
was consistent with estimates of total
construction costs. We also made inquiries ofmultiplemembersofmanagement

andassessed the consistency of the information
provided.

࣭We compared estimates of total
construction costs from prior fiscal years tocosts that were actually incurred toevaluate the effectiveness of the process
for estimating total construction costs.

76

Amount recorded for allowance for contingency loss
Description of Key Audit Matter

Auditor’s Response

In response to defective piling work performed by

We mainly performed the following procedures to

the Company at a condominium in Yokohama, consider the assessment of the amount recorded for
Mitsui Fudosan Residential Co., Ltd. filed a allowance for contingency loss and evaluate thelawsuit on November 28, 2017 seeking damages of completeness of the scope of the defect liability as
approximately 45.9 billion yen and subsequently well as the reasonableness of disclosures.
changed the amount of its compensation claim to࣭ We mainly performed the following

approximately 51.0 billion yen on July 11, 2018. A

procedures to evaluate the impact of the lawsuit

lawsuit to change the compensation claim toon the scope of the defect liability.

approximately 50.6 billion yen was then filed on-We inspected, complaints, hearing reports

September 30, 2022.

and internal reporting materials, and held

As described in “(j) Allowance for Contingency

discussions with management.

Loss” in “2. Summary of Significant Accounting-We evaluated the ability and independence

Policies” under Notes to Consolidated Financialof the attorney retained by the Company.

Statements, the Company recorded an allowance-We considered the attorney’s professional

for contingency loss of 2,159 million yen that was

opinion received from the Company anddeemed necessary as a result of determining theobtained a confirmation letter directly withamount to be borne as the contractor in accordance

the attorney.

with the defect liability applicable to construction

࣭ We inspected minutes of board meetings,

contracts to which the Company was a party.

made inquiries of management, and obtained a

The significant assumption forming the basis
for the amount of the loss contingency arising
as a result of the aforementioned lawsuit is
the scope of the defect liability, and giventhat this assumption is subject to uncertainty
and the judgment of management since theoutcome of the lawsuit has yet to be
determined, we have determined that theamount recorded for allowance forcontingency loss is a key audit matter.

management representation letter to confirm

77that the Company does not accept liabilities forany amount beyond the scope of the defectliability that it had anticipated.

࣭We held discussions with management toassess the reasonableness of financial
statement disclosures.

Other Information
The other information comprises the information included in the Annual Report that contains
audited consolidated financial statements but does not include the consolidated financial
statements and our auditor’s report thereon. Management is responsible for preparation anddisclosure of the other information. The Corporate Auditor and the Board of Corporate Auditors
are responsible for overseeing the Group’s reporting process of the other information.
Our opinion on the consolidated financial statements does not cover the other information and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is toread the other information and, in doing so, consider whether the other information is materiallyinconsistent with the consolidated financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management, the Corporate Auditor and the Board of Corporate
Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting
principles generally accepted in Japan, matters related to going concern.
The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing theGroup’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We
also:

78

࣭ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
࣭ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
࣭ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
࣭ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Group to cease tocontinue as a going concern.
࣭ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentationin accordance with accounting principles generally accepted in Japan.
࣭ Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance ofthe group audit. We remain solely responsible for our audit opinion.
We communicate with the Corporate Auditor and the Board of Corporate Auditors regarding,among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the Corporate Auditor and the Board of Corporate Auditors with a statementthat we have complied with the ethical requirements regarding independence that are relevant toour audit of the consolidated financial statements in Japan, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
From the matters communicated with the Corporate Auditor and the Board of Corporate
Auditors, we determine those matters that were of most significance in the audit of theconsolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a mattershould not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

79

Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2023 are presented solely for convenience. Our audit also included thetranslation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 3 to the consolidated financial
statements.
Ernst & Young ShinNihon LLC
Tokyo, Japan
July 25, 2023

⚟ᮏ ༓ே
Kazuo Fukumoto
Designated Engagement Partner
Certified Public Accountant୰ཎ ⩏຾Yoshikatsu Nakahara
Designated Engagement Partner
Certified Public Accountant

80Non-Consolidated Financial Statements
Sumitomo Mitsui Construction Co., Ltd.
Year ended March 31, 2023
with Independent Auditor’s Report81Sumitomo Mitsui Construction Co., Ltd.
Sumitomo MitsuiCo., Ltd.
Non-Consolidated
Balance Construction
SheetsMarch 31, 2023

Non-Consolidated Balance Sheets
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)

AssetsCurrent assets:
Cash and deposits
Trade notes receivable
Accounts receivable on completed construction contracts
Securities (Note 4-(b))
Inventories
Other current assets
Allowance for doubtful receivables
Total current assets¥ 30,020
508
173,895
348
18,57841,799(2,510)262,640¥ 39,422
634
159,136
147
20,48725,001(214)244,615$ 224,818
3,804
1,302,291
2,606
139,129
313,030(18,797)
1,966,898

Non-current assets:
Property and equipment, at cost:
Land (Note 4-(b))
Buildings (Note 4-(b))
Structures (Note 4-(b))
Machinery and equipment
VehiclesTools, furniture and fixtures
Construction in progress
Accumulated depreciation
Property and equipment, net

5,129
6,607
927
5,210
312
4,745
683
(11,647)
11,969

5,328
5,187
844
5,191
288
4,657
253
(11,168)
10,584

38,41049,4796,942
39,0172,336
35,535
5,114(87,223)
89,635

2,407

2,222

18,025

19,054
22,498
73
303
176
5,280
3,624
(925)
50,08664,463

20,697
26,856
72
360
181
9,634
3,979
(3,262)58,51871,325

142,694
168,486
546
2,269
1,318
39,541
27,139(6,927)375,091
482,760¥327,104¥315,941$2,449,666

Intangible fixed assets
Investments and other assets:
Investments in securities
Investments in subsidiaries and affiliates (Notes 4-(b) and 6)
Long-term loans receivable
Long-term loans to employees
Long-term prepaid expenses
Deferred tax assets (Note 7)
Other
Allowance for doubtful receivables
Total investments and other assets
Total non-current assets

Total assets

182

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Balance Sheets
March 31, 2023

Liabilities and net assets
Current liabilities:
Trade notes payable (Note 4-(a))
Electronically recorded payable (Note 4-(a))
Accounts payable on construction contracts (Note 4-(a))
Short-term bank loans and current portion of long-term debt
(Note 4-(d))
Lease obligations
Income taxes payable
Deposit received
Advances received on construction contracts in progress
Reserve for defects on completed construction projects
Allowance for losses on construction contracts
Allowance for contingency loss
Other current liabilities
Total current liabilities
Long-term liabilities:
Corporate bond payable
Long-term debt (Note 4-(d))
Lease obligations
Accrued retirement benefits
Other long-term liabilities
Total long-term liabilities

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)¥

6,571
24,38561,612¥

4,922
19,592
67,269$49,209182,618
461,409

10,650132
75
18,117
25,664424
37,522
2,159
13,211
200,527

1,700
207
2,424
16,083
19,845399
19,2382,159
13,021
166,864

79,757988
561
135,677
192,196
3,175
281,000
16,16898,936
1,501,737

10,00063,400139
12,497
151
86,1885,000
57,750214
12,8892,596
78,44974,889474,799
1,040
93,5891,130
645,457

12,003

12,00389,889

293
293

326
326

2,194
2,194

2,243
31,85034,094

1,931
60,90862,83916,797
238,523
255,328(3,782)42,608(3,907)
71,262(28,323)
319,089(2,180)(40)(2,220)40,388¥327,104

(542)
(92)
(635)
70,627¥315,941(16,325)(299)(16,625)
302,463$2,449,666

Contingent liabilities (Note 4-(c))
Net assets:
Shareholders’ equity:
Capital stock:
Common stock:
Authorized:
533,892,994 shares in 2023 and 2022
Issued and outstanding:
162,673,321 shares in 2023 and 2022
Capital surplus:
Other capital surplus
Total capital surpluses
Retained earnings:
Legal retained earnings
Earned surplus carried forward
Total retained earnings
Treasury stock, at cost:
6,180,515 shares in 2023 and 6,382,798 shares in 2022
Total shareholders’ equity
Valuation, translation adjustments and other:
Unrealized holding gain on securities
Deferred loss on hedging instruments, net of taxes
Total valuation, translation adjustments and otherTotal net assets
Total liabilities and net assets

See accompanying notes to non-consolidated financial statements.
83

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Income
March 31, 2023

Sumitomo Mitsui Construction Co., Ltd.

Non-Consolidated Statements of Income

Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)

Net sales (Note 8):Completed construction
OthersCost of sales:
Completed construction
OthersGross profit (loss)
Completed construction
OthersSelling, general and administrative expenses (Note 5-(d))
Operating loss
Other income (expenses):
Interest and dividend income (Note 5-(a))
Payments received from insurance claims
Interest expense
Exchange gain, net
Financing related expenses
Litigation related expenses
Commission for loan commitment agreement
Gain on sales of property and equipment(Note 5-(b))
Gain on sales of investments in securities
Gain on liquidation of subsidiaries and affiliates
Loss on sales and disposal of property and equipment(Note 5-(c))
Loss on sales of investments in securities
Other, net (Note 5-(a))
Loss before income taxes
Income taxes (Note 7):¥337,298
292
337,591¥303,964
422
304,387$2,526,009
2,186
2,528,203

342,249
187
342,437

298,087323
298,4112,563,086
1,400
2,564,494(4,951)
105

5,876
99

(37,077)
786(4,845)

5,975(36,283)

18,216(23,062)

17,622(11,647)

136,418(172,710)

2,380
81(1,427)
1,669
(338)
(416)
(381)

2,178
85
(1,086)
348
(410)
(185)
(512)

17,823606(10,686)
12,499(2,531)(3,115)(2,853)

84
185
－

0
18
6

629
1,385
－

(18)
(6)
81
1,892
(21,169)

(130)
－
(775)
(461)
(12,109)

(134)
(44)
606
14,169(158,533)

377
4,072
4,449

2,668
(6,220)(3,551)

2,823
30,49533,318¥ (25,619)¥ (8,557)$ (191,859)

Current
Deferred
Loss(U.S. dollars)(Note 2)

(Yen)
Loss per share – basic¥(163.79)¥(54.76)$(1.227)

See accompanying notes to non-consolidated financial statements.

843

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Sumitomo
Changes In Net
AssetsConstruction Co., Ltd.
MitsuiMarch 31, 2023

Non-Consolidated Statements of Changes in Net Assets
Year ended March 31, 2023
Shareholders’ equity
Additional
paid-in capital

Balance at the beginning of
the period
Cumulative effects ofchanges in accounting
policies
Restated balance
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
Loss
Purchases of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodTreasurystock, at cost

Total
shareholders’equity¥62,839¥(3,907)¥71,262

60,90862,839(3,907)

71,262(3,125)(3,125)(3,125)(312)(25,619)–(25,619)

(2)
126

–
(25,619)(2)
93

Capitalstock

Other capitalsurplus

Earnedreserve¥12,003¥326¥1,931¥60,908

12,003

326

1,931

312
(33)

–

(33)

312

(29,057)(28,745)124(28,653)¥12,003¥293¥2,243¥31,850¥34,094¥(3,782)¥42,608

Year ended March 31, 2023
Valuation, translation adjustments and other
DeferredTotalloss onvaluation,
Unrealized
hedgingtranslation
holding
instruments,
adjustments
loss onnet of taxes
and othersecurities(Millions of yen)
Balance at the beginning of
the period
Cumulative effects ofchanges in accounting
policies
Restated balance
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
Loss
Purchases of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodRetained earnings
Earned surplus
carriedTotal retained
forwardearnings(Millions of yen)Total
net assets¥(542)¥(92)¥(635)¥70,627

(542)

(92)

(635)

70,627(3,125)–(25,619)(2)
93(1,637)52(1,584)(1,584)(1,637)52(1,584)(30,238)¥(2,180)¥(40)¥(2,220)¥40,3884
85

Sumitomo Mitsui Construction Co., Ltd.
Sumitomo
Mitsui
Non-Consolidated Statements of Changes
In NetAssets Construction Co., Ltd.
March 31, 2023

Non-Consolidated Statements of Changes in Net Assets (continued)
Year ended March 31, 2023
Shareholders’ equity
Additional
paid-in capital

Balance at the beginning of
the period
Cumulative effects ofchanges in accounting
policies
Restated balance
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
Loss
Purchases of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodRetained earnings
Earned surplus
carriedEarnedTotal retained
forwardreserveearnings(Thousands of U.S. dollars) (Note 2)

Treasurystock, at cost

Total
shareholders’equity$470,598$(29,259)$533,677

456,137

470,598(29,259)

533,677(23,402)(23,402)(23,402)(2,336)(191,859)–(191,859)

(14)
943

–
(191,859)(14)
696

Capitalstock

Other capitalsurplus$89,889$2,441$14,461$456,137

89,8892,441

14,461

2,336
(247)

–

(247)

2,336

(217,606)(215,269)

928(214,580)$89,889$2,194$16,797$238,523$255,328$(28,323)$319,089

Year ended March 31, 2023
Valuation, translation adjustments and other
DeferredTotalloss onvaluation,
Unrealized
hedgingtranslation
holding
instruments,
adjustments
Totalloss onnet of taxes
and other
net assets
securities(Thousands of U.S. dollars) (Note 2)
Balance at the beginning of
the period
Cumulative effects ofchanges in accounting
policies
Restated balance
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
Loss
Purchases of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiod$(4,059)$(688)$(4,755)$528,922(4,059)(688)(4,755)528,922(23,402)–(191,859)(14)
696(12,259)389(11,862)(11,862)(12,259)389(11,862)(226,450)$(16,325)$(299)$(16,625)$302,463

5
86

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes
In NetAssetsConstruction Co., Ltd.
Sumitomo
MitsuiMarch 31, 2023

Non-Consolidated Statements of Changes in Net Assets (continued)
Year ended March 31, 2022
Shareholders’ equity
Additional
paid-in capital

Balance at the beginning of
the period
Cumulative effects ofchanges in accounting
policies
Restated balance
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
Loss
Purchases of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodTreasurystock, at cost

Total
shareholders’equity¥74,652¥(3,504)¥83,498(426)
72,577(426)
74,226(3,504)(426)
83,072(2,828)(2,828)(2,828)(282)(8,557)–(8,557)

(502)
100

–
(8,557)(502)
79

Capitalstock

Other capitalsurplus

Earnedreserve¥12,003¥347¥1,648¥73,004

12,003

347

1,648

282
(20)

–

(20)

282

(11,669)(11,386)(402)(11,809)¥12,003¥326¥1,931¥60,908¥62,839¥(3,907)¥71,262

Year ended March 31, 2022
Valuation, translation adjustments and other
DeferredTotalloss onvaluation,
Unrealized
hedgingtranslation
holding
instruments,
adjustments
gain (loss) on
net of taxes
and othersecurities(Millions of yen)
Balance at the beginning of
the period
Cumulative effects of changes
in accounting policies
Restated balance
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
Loss
Purchases of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodRetained earnings
Earned surplus
carriedTotal retained
forwardearnings(Millions of yen)Total
net assets¥418¥(147)¥271¥83,770

418

(147)

271

(426)
83,343(2,828)–(8,557)
(502)
79

(961)

54

(907)

(907)

(961)

54

(907)

(12,716)¥ (542)¥ (92)¥ (635)¥70,627

See accompanying notes to non-consolidated financial statements.
6
87

Sumitomo Mitsui Construction Co., Ltd.
Notes to Non-Consolidated Financial Statements

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
March 31, 2023
1.

Summary of Significant Accounting Policies(a) Basis of Presentation
The accompanying non-consolidated financial statements of Sumitomo Mitsui Construction
Co., Ltd. (the “Company”) are prepared on the basis of accounting principles generally
accepted in Japan, which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards, and have been
compiled from the non-consolidated financial statements prepared by the Company as
required by the Financial Instruments and Exchange Law of Japan.
Certain reclassifications have been made to present the accompanying financial statements
in a format which is familiar to readers outside Japan. In addition, certain amounts in theprior year’s financial statements have been reclassified to conform to the current year’s
presentation.
As permitted, amounts of less than one million yen have been omitted. As a result, thetotals shown in the accompanying financial statements do not necessarily agree with thesums of the individual amounts.
(b) Securities and Investments in Subsidiaries and Affiliates
The accounting standard for financial instruments requires that securities be classified
into three categories: trading, held-to-maturity or other securities. Under this standard,
trading securities are carried at fair value and held-to-maturity securities are carried atamortized cost. For other securities, securities other than shares, etc. with no market value
are carried at fair value with any changes in unrealized holding gain or loss, net of theapplicable income taxes, included directly in net assets. Shares, etc. with no market value
are carried at cost. Cost of securities sold is determined by the moving average method.
Investments in subsidiaries and affiliates are stated at cost determined by the moving
average method.
(c) Inventories
Inventories other than materials and supplies are stated at cost determined by the specificidentification method. Materials and supplies are valued at cost determined by theaverage method (cost of materials and supplies is written down when their carrying
amounts become unrecoverable).

7

88Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Depreciation and Amortization(1) Property and equipment (except leased assets)
Depreciation of property and equipment (except leased assets) is determined by the
declining-balance method based on the estimated useful lives and the residual value ofthe respective assets as prescribed in the Corporation Tax Law of Japan except thatthe straight-line method is applied to office buildings (except facilities attached tobuildings) acquired on or after April 1, 1998 and facilities attached to buildings andstructures acquired on or after April 1, 2016.
(2) Intangible fixed assets (except leased assets) and long-term prepaid expenses
Amortization of intangible fixed assets (except leased assets) and long-term
prepaid expenses is calculated by the straight-line method based on the estimateduseful lives of the respective assets as prescribed in the Corporation Tax Law ofJapan. Amortization of computer software for internal use is calculated by thestraight-line method over the estimated useful lives of 5 years.
(3) Leased assets
Depreciation of leased assets under finance leases other than those that transfer theownership of the leased assets to the lessees is calculated by the straight-line
method over the lease term with a residual value of zero.
(e) Advances Received on Construction Contracts in Progress
As is customary in Japan, the Company receives payments from customers on an
installment basis in accordance with the terms of the respective construction contracts.
(f)

Allowance for Doubtful Receivables
An allowance for doubtful receivables has been provided for future losses on general
receivables at an amount calculated by applying the percentage of actual losses oncollection experienced in the past, and an uncollectible amount for doubtful receivables
estimated based on an individual assessment of each receivable and probability ofcollection.

(g) Reserve for Defects on Completed Construction Projects
A reserve has been provided at an estimated amount for the fiscal year’s sales proceeds
in order to cover the liability for future costs of defects of the completed construction
projects.
(h) Allowance for Losses on Construction Contracts
An allowance has been provided based on the estimated amount for the future losses on
construction projects in progress at the fiscal year end which are anticipated to be
substantial losses in the future.
898Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(i)

Allowance for Contingency Loss
An allowance for contingency loss related to the defective piling work at a condominium
in Yokohama has been provided based on the reasonably estimated amount necessary
for payments to be borne as the contractor in accordance with defect liability applicableto the construction contract.

(j)

Employees’ Retirement Benefits(1) Method of attributing expected retirement benefits to periods
In calculating the retirement benefit obligation, the benefit formula method isapplied to attribute the expected retirement benefits to the periods up to year ended
March 31, 2023.
(2) Amortization of actuarial gain or loss and prior service cost
Actuarial gain or loss is amortized in the year following the year in which the gainor loss is recognized by the straight-line method over periods (11 years), which areshorter than the average remaining years of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method overperiods (11 years), which are shorter than the average remaining years of serviceof the employees.

(k) Recognition of Revenues and Costs
Recognition of sales and costs of the completed construction
The Company is primarily engaged in civil construction and building construction,
providing construction design and construction work services as well as other related
services to its domestic and overseas customers.
In civil and building construction, the Company primarily enters into long-term
construction contracts. For such contracts, the completion and delivery of construction
work is identified as a performance obligation. Performance obligations are deemed tobe satisfied over time, and revenue is recognized based on progress toward complete
satisfaction of a performance obligation. The progress toward complete satisfaction ofa performance obligation is measured based on the proportion of construction costs
incurred by the end of the reporting period to the total expected construction costs. Whenthe progress toward complete satisfaction of a performance obligation cannot bereasonably measured, but the costs to be incurred are expected to be recovered, revenue
is recognized only to the extent of the costs incurred, except for those contracts that arein the initial stages of construction. For construction contracts whose period between
the date of commencement of the transaction and the point in time when the performanceobligation is expected to be fully satisfied is very short, an alternative treatment isapplied, whereby revenue is not recognized over time, but is recognized when theperformance obligation is fully satisfied.

90

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Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023(l)

Derivatives and Hedge Accounting(1) Method of hedge accounting
Derivative financial instruments are mainly stated at fair value except thoseaccounted for under deferred hedge accounting.
Interest rate swaps qualifying for hedge accounting and meeting specific matching
criteria are not re-measured at market value, but the differential paid or received
under the swap agreements is charged or credited to income (short-cut method).
(2) Hedging instruments and hedged items
Hedging instruments:

Interest rate swaps

Hedged items:

Interest on debt

(3) Hedging policy
The Company utilizes interest rate swaps only for the purpose of hedging futurerisks of fluctuation of interest rates.
(4) Assessment of hedge effectivenessAn evaluation of hedge effectiveness for interest rate swaps by principle method is
performed on a quarterly basis to confirm that there is a strong correlation between
hedged items and hedging instruments by comparing accumulated amount of thechange of cash flows of hedged items and accumulated amount of the change ofcash flows of hedging instruments to assess whether the forward contract qualifies
for hedge accounting. However, the evaluation of hedge effectiveness is omitted incase of interest rate swaps meeting specific matching criteria.
(m) Accounting for Retirement Benefits
Accounting for unrecognized actuarial loss and unrecognized prior service cost on nonconsolidated financial statements is different from the accounting on consolidated
financial statements.
(n) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between theamounts calculated for financial reporting purposes and the tax bases of the assets andliabilities and are measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.

9110Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023(o) Accounting Method of Joint Ventures for Construction Project
Assets, liabilities, costs and profits for a joint venture project are mainly recognized on
pro-rata basis of investment ratio of each members.
2. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan and has been made at ¥133.53 = U.S.$1.00, the approximate rate ofexchange prevailing on March 31, 2023. This translation should not be construed as arepresentation that yen have been, could have been, or could in the future be, converted into
U.S. dollars at that or any other rate.
3.

Significant Accounting Estimates

For the year ended March 31, 2023
(a) Allowance for Contingency Loss
(1) Amounts recognized on the financial statements for this fiscal year

Allowance for contingency loss

As of March 31, 2023
(Millions of yen)(Thousands of U.S. dollars)¥2,159$16,16892

11

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(a) Allowance for Contingent Loss (continued)(2) Information of significant accounting estimates for the item above
An allowance for contingency loss related to the defective piling work at acondominium in Yokohama has been provided based on the reasonably estimatedamount necessary for payments to be borne as the contractor in accordance withdefect liability applicable to the construction contract.
Mitsui Fudosan Residential Co., Ltd. (hereinafter as “MFR”), which is one of thedevelopers of the apartment, initiated a lawsuit against the Company and two pilingcompanies on November 28, 2017, claiming about 45.9 billion yen (which amountincreased to approximately 51.0 billion yen on July 11, 2018, and decreased fromapproximately 51.0 billion yen to approximately 50.6 billion yen on September 30,2022) as alleged rebuilding cost for the whole structure of the apartment. The
Company considers that MFR’s claim lacks legal foundation and reason, and willcontinue to make appropriate arguments in that court proceeding.
(b) Recognition of Revenues from Construction Contracts(1) Amounts recognized on the financial statements for this fiscal year
Year ended March 31, 2023
(Millions of yen) (Thousands of U.S. dollars)
Net sales of construction contracts,
etc. related to performanceobligations to be satisfied over time¥309,586$2,318,475(2) Information of significant accounting estimates for the item above
For construction contracts, etc. whose performance obligations are satisfied overtime, the progress toward complete satisfaction of a performance obligation ismeasured and net sales of completed construction contracts are recognized overtime based on such progress toward satisfaction of the performance obligation.
It is necessary to estimate total revenues and costs of a project reasonably uponrecognition. The Company’s results may fluctuate due to changes in net sales andcosts of completed construction contracts as a result of negotiations with clients,
unanticipated incurrence of costs, or other reasons.

93

12Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
3. Significant Accounting Estimates (continued)
For the year ended March 31, 2022(a) Allowance for Contingency Loss
(1) Amounts recognized on the financial statements for this fiscal year

Allowance for contingency loss

As of March 31, 2022
(Millions of yen)
¥2,159(2) Information of significant accounting estimates for the item above
An allowance for contingency loss related to the defective piling work at acondominium in Yokohama has been provided based on the reasonably estimatedamount necessary for payments to be borne as the contractor in accordance withdefect liability applicable to the construction contract.
Mitsui Fudosan Residential Co., Ltd. (hereinafter as “MFR”), which is one of thedevelopers of the apartment, initiated a lawsuit against the Company and two pilingcompanies on November 28, 2017, claiming about 45.9 billion yen (which amountincreased to approximately 51.0 billion yen on July 11, 2018) as alleged rebuilding
cost for the whole structure of the apartment. The Company considers that MFR’s
claim lacks legal foundation and reason, and will continue to make appropriate
arguments in that court proceeding.
(b) Recognition of Revenues from Construction Contracts(1) Amounts recognized on financial statements for this fiscal year
Year ended March
31, 2022(Millions of yen)
Net sales of construction contracts,
etc. related to performanceobligations to be satisfied over time

¥274,053(2) Information of significant accounting estimates for the item above
For construction contracts, etc. whose performance obligations are satisfied overtime, the progress toward complete satisfaction of a performance obligation ismeasured and net sales of completed construction contracts are recognized overtime based on such progress toward satisfaction of the performance obligation.
It is necessary to estimate total revenues and costs of a project reasonably uponrecognition. The Company’s results may fluctuate due to changes in net sales andcosts of completed construction contracts as a result of negotiations with clients,
unanticipated incurrence of costs, or other reasons.
94

13

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
4. Notes to Non-Consolidated Balance Sheets(a) Outstanding Balances with Subsidiaries and Affiliates
Significant outstanding balances for subsidiaries and affiliates other than individuallypresented on the accompanying non-consolidated balance sheets at March 31, 2023 and2022 were as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Trade notes payable
Electronically recorded payable
Accounts payable on construction
contracts

¥211
6,202

¥437
4,120

$1,58046,446

10,7918,225

80,813(b) Pledged Assets
The following assets were pledged at March 31, 2023 and 2022 principally as collateralfor guarantees (such as guarantees for the completion of construction contracts):
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Land
Buildings, net of accumulated
depreciation
Structures, net of accumulated
depreciation
Investments in subsidiaries and affiliates
Total¥1,537¥1,735$11,510

1,153

101

8,634

149
363
¥3,20428
363¥2,227

1,115
2,718$23,994

There were no secured liabilities as of March 31, 2023 and 2022.
The following assets were pledged at March 31, 2023 and 2022 as collateral for businesssecurity deposits:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Securities

¥285

¥139

$2,13495

14

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
4.

Notes to Non-Consolidated Balance Sheets (continued)(c) Contingent Liabilities
At March 31, 2023 and 2022, the Company was contingently liable for the following:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
As guarantor of bank loans to
subsidiaries and other
Advance deposits¥8,214609¥7,142
482$61,5144,560(d) Financial Covenants
As of March 31, 2023
(1) The Company has entered into a loan commitment agreement dated on March 31,
2016 with its seven banks with Sumitomo Mitsui Banking Corporation as arranger.
The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2016 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2014 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2023.
Unused amount on loan commitment agreement as of March 31, 2023 and 2022
were as follows.
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

96¥20,000–¥20,000¥20,000–¥20,000$149,779–$149,779

15

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)(2) The Company has entered into a syndicated loan contract dated on September 28,
2016 with its seven banks (including five different banks from (1) above) with
Sumitomo Mitsui Banking Corporation as arranger. The following financial covenant
is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,2017 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2016 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥1,750 million ($13,105 thousand) in long-term debt (including the current
portion) as of March 31, 2023.
(3) The Company has entered into a committed syndicated loan contract dated on
March 30, 2018 with its seven banks (same bank as we had contracted for the year
ended March 31, 2016) with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,2018 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2017 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥10,000 million ($74,889 thousand) in long-term debt (including thecurrent portion) as of March 31, 2023.
Unused amount on the committed syndicated loan contract as of March 31, 2023
and 2022 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥10,000¥10,000$74,889
10,00010,00074,889
¥
–
¥
–
$
–

97

16

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)(4) The Company has entered into a committed syndicated loan contract dated on
December 26, 2019 with its ten banks (including six different banks from (3)above) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2020 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2019 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥10,000 million ($74,889 thousand) in long-term debt as of March 31,2023.
Unused amount on the committed syndicated loan contract as of March 31, 2023
and 2022 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)¥10,000¥10,000$74,889
10,00010,00074,889¥–¥–$–(5) The Company has entered into a general syndicated committed loan contract datedon June 25, 2020 with its twenty-five banks with Sumitomo Mitsui Banking
Corporation as arranger. The following financial covenant is included in thecontract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥15,000 million ($112,334 thousand) in long-term debt as of March 31,
2023.

98

17

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)
Unused amount on the committed syndicated loan contract as of March 31, 2023
and 2022 were as follows.
As of March 31,
2023
2021
2023
(Millions of yen)(Thousands of
U.S. dollars)
Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)¥15,000
15,000¥–¥15,000
15,000¥–$112,334
112,334$–(6) The Company has entered into a syndicated loan contract dated on September 29,
2020 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust Bank,
Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥1,000 million ($7,488 thousand) in long-term debt (including the current portion)
as of March 31, 2023.
(7) The Company has entered into a syndicated loan contract dated on March 29, 2021
with its seven banks (same bank as we had contracted for the year ended March 31,2016) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million ($74,889 thousand) in long-term debt as of March 31, 2023.

99

18

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)(8) The Company has entered into a syndicated loan contract dated on March 28. 2022with its eight banks (same bank as we had contracted for the year ended March 31,2016) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2022 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2021 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million ($74,889 thousand) in long-term debt as of March 31, 2023.
(9) The Company has entered into a committed syndicated loan contract dated on
March 28, 2022 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui
Trust Bank, Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2022 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2021 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥6,300 million ($47,180 thousand) in long-term debt (including thecurrent portion) as of March 31, 2023.
Unused amount on the committed syndicated loan contract as of March 31, 2023
and 2022 were as follows.
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)¥7,000
7,000¥–¥7,000–¥7,000$52,422
52,422
$
–

100

19

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)(10) The Company has entered into a loan commitment agreement dated on May 24,
2022 with its seven banks (same bank as we had contracted for the year ended
March 31, 2016) with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of the second quarter of the fiscal year
ended March 31, 2023 shall be equal to or exceed 75% of total consolidated net
assets as of March 31, 2022.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2023.
Unused amount on loan commitment agreement as of March 31, 2023 and 2022
were as follows.
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Maximum limit under the agreement¥30,000¥–$224,668–––
Loan balance outstanding¥–$224,668¥30,000
Difference (unused portion)(11) The Company has entered into a loan commitment agreement dated on June 27,
2022 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust
Bank, Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of the second quarter of the fiscal year
ended March 31, 2023 shall be equal to or exceed 75% of total consolidated net
assets as of March 31, 2022.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2023.

101

20

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)
Unused amount on loan commitment agreement as of March 31, 2023 and 2022
were as follows.
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Maximum limit under the agreement¥20,000¥–$149,779–––
Loan balance outstanding¥20,000¥–$149,779
Difference (unused portion)(12) The Company has entered into a general syndicated loan contract dated on
September 27, 2022 with its twenty-one banks with Sumitomo Mitsui Banking
Corporation as arranger. The following financial covenant is included in thecontract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2023 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2022 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million ($74,889 thousand) in long-term debt as of March 31, 2023.
Contracts other than (10) and (11) above are in conflict with financial covenants at
the end of the current fiscal year, however, as of May 19, 2023, the Company
obtained approval from our financial institutions to not exercise their rights to lose
profits for the time limit due to such conflicts.
As of March 31, 2022
(1) The Company has entered into a loan commitment agreement dated on March 31,
2016 with its seven banks with Sumitomo Mitsui Banking Corporation as arranger.
The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2016 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2014 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2022.
Unused amount on loan commitment agreement as of March 31, 2022 and 2021
were as follows.
102

21

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)
As of March 31,
2022
2021
(Millions of yen)
Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)¥20,000–¥20,000¥20,000–¥20,000(2) The Company has entered into a syndicated loan contract dated on September 28,
2016 with its seven banks (including five different banks from (1) above) with
Sumitomo Mitsui Banking Corporation as arranger. The following financial covenant
is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,2017 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2016 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥2,250 million in long-term debt (including the current portion) as of March 31,
2022.
(3) The Company has entered into a committed syndicated loan contract dated on
March 30, 2018 with its seven banks (same bank as we had contracted for the year
ended March 31, 2016) with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,2018 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2017 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥10,000 million in long-term debt as of March 31, 2022.
Unused amount on the committed syndicated loan contract as of March 31, 2022
and 2021 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)103

As of March 31,
2022
2021
(Millions of yen)
¥10,000¥10,000
10,00010,000¥–¥–22

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)(4) The Company has entered into a committed syndicated loan contract dated on
December 26, 2019 with its ten banks (including six different banks from (3)above) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2020 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2019 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥10,000 million in long-term debt as of March 31, 2022.
Unused amount on the committed syndicated loan contract as of March 31, 2022
and 2021 were as follows.

Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)

As of March 31,
2021
2022
(Millions of yen)
¥10,000¥10,000
10,00010,000¥–¥–(5) The Company has entered into a general syndicated committed loan contract datedon June 25, 2020 with its twenty-five banks with Sumitomo Mitsui Banking
Corporation as arranger. The following financial covenant is included in thecontract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In addition, the balance of bank borrowings under the committed syndicated loan
contract is ¥15,000 million in long-term debt as of March 31, 2022.

104

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Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)
Unused amount on the committed syndicated loan contract as of March 31, 2022
and 2021 were as follows.
As of March 31,
2022
2021
(Millions of yen)
Maximum limit under the contract
Loan balance outstanding
Difference (unused portion)¥15,000
15,000¥–¥15,000
15,000¥–(6) The Company has entered into a syndicated loan contract dated on September 29,
2020 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust Bank,
Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥2,200 million in long-term debt (including the current portion) as of March 31,
2022.
(7) The Company has entered into a syndicated loan contract dated on March 29, 2021
with its seven banks (same bank as we had contracted for the year ended March 31,2016) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2021 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2020 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million in long-term debt as of March 31, 2022.

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Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)(8) The Company has entered into a loan commitment agreement dated on May 25,
2021 with its seven banks (same bank as we had contracted for the year ended
March 31, 2016) with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of the second quarter of the fiscal year
ended March 31, 2022 shall be equal to or exceed 75% of total consolidated net
assets as of March 31, 2021.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2022.
Unused amount on loan commitment agreement as of March 31, 2022 and 2021
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2022
2021
(Millions of yen)
¥30,000¥–––¥30,000¥–(9) The Company has entered into a loan commitment agreement dated on June 25,
2021 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust
Bank, Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of the second quarter of the fiscal year
ended March 31, 2022 shall be equal to or exceed 75% of total consolidated net
assets as of March 31, 2021.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the loan commitment
agreement as of March 31, 2022.

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25

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)
Unused amount on loan commitment agreement as of March 31, 2022 and 2021
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2022
2021
(Millions of yen)
¥20,000¥–––¥20,000¥–(10) The Company has entered into a syndicated loan contract dated on March 28. 2022with its seven banks (same bank as we had contracted for the year ended March 31,2016) with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2022 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2021 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million in long-term debt as of March 31, 2022.
(11) The Company has entered into a committed syndicated loan contract dated on
March 28, 2022 with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui
Trust Bank, Limited. The following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2022 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2021 or of total consolidated net assets at the end of the most recent fiscal year,
whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, there was no balance of bank borrowings under the committed
syndicated loan contract as of March 31, 2022.

107

26

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
(d) Financial Covenants (continued)
Unused amount on the committed syndicated loan contract as of March 31, 2022
and 2021 were as follows.
As of March 31,
2022
2021
(Millions of yen)
Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)
5.

¥7,000–¥7,000¥––¥–Notes to Non-Consolidated Statements of Income(a) Transactions with Subsidiaries and Affiliates
Significant transactions with subsidiaries and affiliates other than those individuallypresented on the accompanying non-consolidated statements of income for the years
ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Dividend income
Royalty income
Allowance for doubtful accounts¥1,406388
74¥1,399252
214$10,5292,905554(b) Gain on Sales of Property and Equipment
The significant components of gain on sales of property and equipment for the years
ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
¥9
¥–
$67
3
–
22
1
0
7
0
0
0
69
–
516
$629
¥84
¥0

Buildings
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Total

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Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
5.

Notes to Non-Consolidated Statements of Income (continued)(c) Loss on Sales and Disposal of Property and Equipment
The significant components of loss on sales and disposal of property and equipment for
the years ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Loss on disposal
Loss on sales
Total

¥18
–
¥18

¥130
0
¥130

$134
–
$134

(d) Selling, General and Administrative Expenses
The significant components of selling, general and administrative expenses for the years
ended March 31, 2023 and 2022 were as follows:
Years ended March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Salaries and wages
Depreciation expenses
Other
Total

¥ 8,459
837
8,919¥18,216¥ 8,365918
8,338¥17,622$ 63,349
6,268
66,793$136,418

6. Securities
Stocks of subsidiaries and affiliates at March 31, 2023 and 2022 were as follows:
As of March 31, 2023
Carrying
Fair
Unrealized Carrying
Fair
Unrealized
value
value
gain
value
value
gain
(Millions of yen)(Thousands of U.S. dollars)
Stocks ofa subsidiary¥717¥4,279¥3,561$5,369$32,045$26,668

Note: Stocks of subsidiaries and affiliates with no market value that were excluded fromthe above were as follows:
As of March 31,
2023
2023
Carrying value(Millions of yen) (Thousands of
U.S. dollars)
Stocks of subsidiaries
Stocks of affiliates¥15,25340$114,229
299
109

28

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
6. Securities (continued)
As of March 31, 2022
Carrying
Fair
Unrealized
value
value
gain
(Millions of yen)
Stocks of a subsidiary¥717¥5,360¥4,642As of March 31,
2022
Carrying value(Millions of yen)
Stocks of subsidiaries
Stocks of affiliates

7.

¥14,942
29

Income Taxes

The significant components of the Company’s deferred tax assets and liabilities at March 31,
2023 and 2022 were as follows:
As of March 31,
2023
2022
2023
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued retirement benefits
Account payable and accrued expenses
Allowance for bad debts
Loss on valuation of investment securities
Loss on devaluation of investments in
subsidiaries and affiliates
Reserve for defects on completed
construction projects
Allowance for losses on construction
contracts
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Asset retirement obligations
Total deferred tax liabilities
Net deferred tax assets¥3,826
1,993
1,052
–

¥3,946
1,985
1,064
240

$28,652
14,925
7,878
–

952

896

7,129

129

122

966

13,538975
22,468(17,172)
5,296

6,500
1,017
15,774(6,123)
9,651

101,385
7,301
168,261(128,600)
39,661(15)(15)¥5,280(17)(17)¥9,634(112)(112)$39,541

110

29

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2023
7.

Income Taxes (continued)

The significant differences between the statutory tax rates and the effective tax rates
The note is omitted due to the posting of loss before income taxes for the years ended March
31, 2023 and 2022.
The accounting treatment of corporate and local income taxes, and related tax effectaccounting
The Company has adopted the group tax sharing system from the current consolidated fiscal
year. In addition, the Company conducts accounting treatment and disclosure of corporate
and local income taxes, and related tax effect accounting in accordance with the “Practical
Solution on the Accounting and Disclosure Under the Group Tax Sharing System” (ASBJ
PITF No. 42 issued on August 12, 2021).
8.

Revenue Recognition

The note on useful information in understanding revenue from contracts with customers isomitted since the Consolidated Financial Statement (Notes to Consolidated Financial
Statements, Revenue Recognition) provides the same information.
9.

Subsequent Event
Not applicable.

111

30

Independent Auditor’s Report

The Board of Directors
Sumitomo Mitsui Construction Co., Ltd.
OpinionWe have audited the accompanying non-consolidated financial statements of Sumitomo Mitsui
Construction Co., Ltd. ( the Company), which comprise the non-consolidated balance sheet as at
March 31, 2023, and the non-consolidated statements of income and changes in net assets, forthe year then ended, and notes to the non-consolidated financial statements.
In our opinion, the accompanying non-consolidated financial statements present fairly, in allmaterial respects, the non-consolidated financial position of the Company as at March 31, 2023,
and its non-consolidated financial performance for the year then ended in accordance withaccounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Non-Consolidated Financial Statements section of our report. We are
independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the non-consolidated financial statements in Japan, and we have fulfilled our otherethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the non-consolidated financial statements of the current period. These matterswere addressed in the context of the audit of the non-consolidated financial statements as awhole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion
on these matters.
Estimates of total construction costs under the method of recognizing revenue as
performance obligations are satisfied over time
The details of this key audit matter have been omitted since they are the same as those describedin the auditor’s report for the consolidated financial statements.
Amount recorded for allowance for contingency loss
The details of this key audit matter have been omitted since they are the same as those describedin the auditor’s report for the consolidated financial statements.

112

Other Information
The other information comprises the information included in the Annual Report that contains
audited non-consolidated financial statements but does not include the non-consolidated
financial statements and our auditor’s report thereon. Management is responsible for preparationand disclosure of the other information. The Corporate Auditor and the Board of Corporate
Auditors are responsible for overseeing the Company’s reporting process of the otherinformation.
Our opinion on the non-consolidated financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the non-consolidated financial statements, our responsibility is toread the other information and, in doing so, consider whether the other information is materiallyinconsistent with the non-consolidated financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management, the Corporate Auditor and the Board of Corporate
Auditors for the Non-Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these non-consolidated
financial statements in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of
non-consolidated financial statements that are free from material misstatement, whether due tofraud or error.
In preparing the non-consolidated financial statements, management is responsible for assessing
the Company’s ability to continue as a going concern and disclosing, as required by accounting
principles generally accepted in Japan, matters related to going concern.
The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing theCompany’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Non-Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the non-consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these nonconsolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We
also:

113

࣭ Identify and assess the risks of material misstatement of the non-consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
࣭ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the non-consolidated financial statements is not expressing an opinion on the effectivenessof the Company’s internal control.
࣭ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
࣭ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the nonconsolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Company to cease tocontinue as a going concern.
࣭ Evaluate the overall presentation, structure and content of the non-consolidated financial
statements, including the disclosures, and whether the non-consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentationin accordance with accounting principles generally accepted in Japan.
࣭ Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Company to express an opinion on the nonconsolidated financial statements. We are responsible for the direction, supervision andperformance of the company audit. We remain solely responsible for our audit opinion.
We communicate with the Corporate Auditor and the Board of Corporate Auditors regarding,among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the Corporate Auditor and the Board of Corporate Auditors with a statementthat we have complied with the ethical requirements regarding independence that are relevant toour audit of the non-consolidated financial statements in Japan, and to communicate with them
all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with the Corporate Auditor and the Board of Corporate
Auditors, we determine those matters that were of most significance in the audit of the nonconsolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a mattershould not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

114

Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company whichis required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Convenience Translation
The U.S. dollar amounts in the accompanying non-consolidated financial statements withrespect to the year ended March 31, 2023 are presented solely for convenience. Our audit also
included the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 2 to the non-consolidated
financial statements.
Ernst & Young ShinNihon LLC
Tokyo, Japan
July 25, 2023

⚟ᮏ ༓ே
Kazuo Fukumoto
Designated Engagement Partner
Certified Public Accountant୰ཎ ⩏຾Yoshikatsu Nakahara
Designated Engagement Partner
Certified Public Accountant

115

CORPORATE OUTLINE
Corporate Name:

Main Scope of Business:

Main Banks

Sumitomo Mitsui Construction Co.,Ltd.

1) To contract, plan, design and/or supervise
civil engineering, architectural, prestressed
concrete, electrical, piping and other works

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited

Established:
October 14, 1941

Permission:(Special-3)No.200, Specified Constructor,
granted by the Minister of Land,
Infrastructure, Transport and Tourism

License:(16)No.1, Housing, Land and Building Dealer,
granted by the Minister of Land, Infrastructure,
Transport and Tourism

Main Shareholders
2) To plan, design and supervise marine
development, regional development,
urban development, natural resource
development and environment
maintenance3) To manufacture, sell and lease materials
for civil and building works, prestressed
concrete products, seismic isolating
device, seismic damping device, andother machinery and instruments

Corporate History

116

The Master Trust Bank of Japan, Ltd.
CITY INDEX ELEVENTH CO., Ltd
Mitsui Fudosan Co., Ltd.
Sumitomo Realty & Development Co., Ltd.
Custody Bank of Japan, Ltd.

CORPORATE DATAHEAD OFFICE

Bangkok (Thailand)

SMCC Philippines, Inc.

2-1-6 Tsukuda, Chuo-ku,
Tokyo, 104-0051, Japan

26/49, 14th Floor, Orakarn Building, Soi Chidlom,
Ploenchit Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
TEL:66-2-250-0560
FAX:66-2-254-7405

10F Frabelle Corporate Plaza,129 Tordesillas
Corner Bautista Salcedo Village Makati City,
Philippines.
TEL:63-2-840-4913
FAX:63-2-840-4912

Yangon (Myanmar)

SMCC Overseas Singapore Pte. Ltd.

#16-06, Crystal office Tower, Kyun Taw Street,
Kamyut Township, Yangon, Myanmar
TEL:95-1-933-9256 / 95-9-25156-5442

2 Bukit Merah Central #14-01 & 02, Singapore
159835
TEL:65-6933-8000
FAX:65-6933-8001

INTERNATIONAL DIVISION
2-1-6 Tsukuda, Chuo-ku,
Tokyo, 104-0051, Japan
TEL:81-3-4582-3171
FAX:81-3-4582-3247

OVERSEAS OFFICES
Manila (Philippines)
15th Floor, GT Tower International, 6813
Ayala Avenue corner H.V. Dela Costa Street,
Makati City, Metro Manila, Philippines
TEL:63-2-5304-5300/5301/5302

Phnom Penh (Cambodia)(Phnom Penh Center) South Building, 8 floor,
Room No. 871, Street Sothearos (3), Phom 1,
Sangkat Tonle Bassac, Khan Chamkarmon,
Phnom Penh, 120101, Cambodia
TEL:855-78-777-072

Guam (USA)Suite 105-107, IBC Building, J.L. Baker Street,
Harmon Industrial Park, Harmon, Guam 96913(P.O.Box 9670, Tamuning, Guam 96931)
TEL:1-671-649-7521
FAX:1-671-649-7550

Hanoi (Vietnam)#502-504, 5th Floor, V-Tower, 649 Kim Ma str., Ba
Dinh Dist., Hanoi, Vietnam
TEL:84-24-3942-8888
FAX:84-24-3942-8808

SUBSIDIARY COMPANIES INOVERSEAS
SMCC(Thailand)Co.,Ltd.
26/49, 14th Floor, Orakarn Building, Soi Chidlom,
Ploenchit Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
TEL:66-2-250-0560
FAX:66-2-254-7405

PT. SMCC Utama Indonesia
Singapore
2 Bukit Merah Central #14-01 & 02, Singapore
159835
TEL:65-6933-8000
FAX:65-6933-8001

Summitmas 2, 20th Floor JL. Jend. Sudirman Kav.
61-62, Jakarta Selatan 12190, Indonesia
TEL:62-21-520-1757
FAX:62-21-525-0905

SMCC Construction India Ltd.
Jakarta (Indonesia)
Summitmas 2, 20th Floor JL. Jend. Sudirman Kav.
61-62, Jakarta Selatan 12190, Indonesia
TEL:62-21-520-1757
FAX:62-21-525-0905

201, 2nd Floor, Plot No. -D1, Ras Vilas, Saket
District Centre, Saket, New Delhi 110017, India
TEL:91-11-41392800
FAX:91-11-41652592

117

SMCC Malaysia Sdn. Bhd.
Level 13, Suite13. 06, Johor Bahru City Square(Office Tower)
106-108 Jalan Wong Ah Fook, 80000 Johor Bahru,
Malaysia
TEL:60-7-207-1133
FAX:60-7-207-3311

SMCC Taiwan Co., Ltd.
7F., No.26, Sec. 3, Najing E. Rd., Zhongshan Dist.,
Taipei City , Taiwan (R.O.C.)
TEL:81-3-4582-3171
FAX:81-3-4582-3247

Antara Koh Private Limited
27 Pioneer Road, Singapore 628500
TEL: 65-6862-2822
FAX: 65-6861-1335