KANEMATSU CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017

～CONSOLIDATED FINANCIAL STATEMENTS～

PAGES

Consolidated Statement of Financial Position .............................................................................................................................. 1
Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ...................................................... 3
Consolidated Statement of Changes in Equity ............................................................................................................................. 5
Consolidated Statement of Cash Flows ........................................................................................................................................ 7～NOTES TO CONSOLIDATED FINANCIAL STATEMENTS～
1.

Reporting Entity .................................................................................................................................................................... 92.

Basis of Preparing Consolidated Financial Statements ......................................................................................................... 93.

Significant Accounting Policies .......................................................................................................................................... 104.

Standards and interpretations issued but not yet adopted .................................................................................................... 16

5.

Business Combinations ....................................................................................................................................................... 17

6.

Segment Information ........................................................................................................................................................... 18

7.

Trade and Other Receivables .............................................................................................................................................. 21

8.

Inventories ........................................................................................................................................................................... 21

9.

Property, Plant and Equipment............................................................................................................................................ 22

10.

Goodwill and Intangible Assets ........................................................................................................................................ 24

11.

Interests in Associates and Joint Ventures ........................................................................................................................ 27

12.

Other Investments ............................................................................................................................................................. 27

13.

Other Current Assets and Other Non-current Assets ........................................................................................................ 27

14.

Trade and Other Payables ................................................................................................................................................. 28

15.

Bonds and Borrowings ...................................................................................................................................................... 28

16.

Provisions .......................................................................................................................................................................... 29

17.

Other Current Liabilities and Other Non-current Liabilities ............................................................................................. 29

18.

Equity ................................................................................................................................................................................ 29

19.

Revenue ............................................................................................................................................................................. 31

20.

Selling, General and Administrative Expenses ................................................................................................................. 31

21.

Gain or Loss on Sale or Disposal of Property, Plant and Equipment and Intangible Assets ............................................. 31

22.

Impairment Loss ............................................................................................................................................................... 31

23.

Exchange Differences ....................................................................................................................................................... 32

24.

Finance Income and Finance Costs ................................................................................................................................... 32

25.

Earnings Per Share Attributable to Owners of the Parent ................................................................................................. 33

26.

Other Components of Equity and Other Comprehensive Income ..................................................................................... 33

27.

Cash Flow Information ..................................................................................................................................................... 34

28.

Employee Benefits ............................................................................................................................................................ 36

29.

Current and Deferred Income Tax..................................................................................................................................... 39

30.

Financial Instruments ........................................................................................................................................................ 41

31.

Leases ................................................................................................................................................................................ 58

32.

Pledged Assets .................................................................................................................................................................. 59

33.

Contingent Liabilities ........................................................................................................................................................ 59

34.

Significant Subsidiaries ..................................................................................................................................................... 60

35.

Related Parties................................................................................................................................................................... 63

36.

Subsequent Events ............................................................................................................................................................ 64

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
Consolidated Statement of Financial Position
JPY
2017(Assets)
I. Current assets
1. Cash and cash equivalents (Note 27)
2. Trade and other receivables (Note 7)
3. Inventories (Note 8)
4. Other financial assets (Note 30)
5. Other current assets (Note 13)

USD (Note 2)
2016

2017

77,566
191,193
80,662
3,705
18,20087,466
163,540
80,1952,596
12,776

691,387
1,704,195
718,977
33,033
162,232

Total current assets

371,329

346,574

3,309,824

II. Non-current assets
1. Property, plant and equipment (Note 9)
2. Goodwill (Note 10)
3. Intangible assets (Note 10)
4. Investments accounted for using the equity method(Note 11)
5. Trade and other receivables (Note 7)
6. Other investments (Note 12)
7. Other financial assets (Note 30)
8. Deferred tax assets (Note 29)
9. Other non-current assets (Note 13)

26,8586,304
20,935
4,885
1,169
34,112
5,295
5,018
3,807

26,883
4,631
8,083
7,420
460
31,535
5,441
9,084
3,477

239,400
56,197
186,61143,546
10,425304,057
47,202
44,73733,941

Total non-current assets

108,388

97,017966,117

Total assets

479,717443,592

4,275,941(Notes) Presentation of fiscal year and amounts (Japanese Yen and U.S. dollars)
1. “2017” refers to the Company’s consolidated fiscal year ended March 31, 2017 and the other fiscal year is referred to in thecorresponding manner.
2. “JPY” means millions of Japanese Yen and “USD” means thousands of U.S. dollars.

Continued
1

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
JPY
2017
(Liabilities)
I. Current liabilities
1. Trade and other payables (Note 14)
2. Bonds and borrowings (Note 15)
3. Other financial liabilities (Note 30)
4. Income taxes payable
5. Provisions (Note 16)
6. Other current liabilities (Note 17)

USD (Note 2)
2017

2016

165,01164,643
5,255
4,226
28
26,291

142,143
61,989
7,129
2,274
31
19,465

1,470,822
576,197
46,84137,670251
234,348

Total current liabilities

265,455

233,034

2,366,128

II. Non-current liabilities
1. Bonds and borrowings (Note 15)
2. Other financial liabilities (Note 30)
3. Retirement benefit liabilities (Note 28)
4. Provisions (Note 16)
5. Deferred tax liabilities (Note 29)
6. Other non-current liabilities (Note 17)

69,201
6,118
6,641
1,397
424
614

74,877
6,679
6,024
1,272
297
699

616,824
54,541
59,19812,4603,786
5,475

Total non-current liabilities
Total liabilities(Equity)
1. Share capital (Note 18)
2. Capital surplus (Note 18)
3. Retained earnings (Note 18)
4. Treasury stock (Note 18)
5. Other components of equity (Note 26)
1) Exchange differences on translation of foreign operations
2) Financial assets measured at fair value through othercomprehensive income3) Cash flow hedges
Total other components of equity

84,39889,851

752,283

349,854322,885

3,118,411

27,781
26,797
34,579(217)

27,781
26,463
29,103(235)

247,626
238,857
308,225(1,942)

2,349

2,912

20,943

9,455
(388)

6,967
(1,393)84,285(3,465)

11,416

8,486

101,762

Total equity attributable to owners of the Parent

100,357

91,599894,527

6. Non-controlling interests

29,50629,107

263,003

Total equity

129,863

120,706

1,157,530

Total liabilities and equity

479,717443,592

4,275,941

The accompanying notes are an integral part of these consolidated financial statements
2

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
Consolidated Statement of Income and Consolidated Statement of Comprehensive Income(a) Consolidated Statement of Income
JPY
2017

USD (Note 2)
2016

2017

I. Revenue (Notes 6 & 19)

675,579

668,374

6,021,748

II. Cost of sales(575,440)(582,135)(5,129,159)

Gross profit

100,139

86,238892,589

III. Selling, general and administrative expenses (Note 20)(76,163)(68,577)(678,876)

1. Gain (loss) on sale or disposal of property, plant andequipment and intangible assets, net (Note 21)

384

(311)

3,430

2. Impairment loss on property, plant and equipment andintangible assets (Note 22)

(866)

(94)

(7,724)

IV. Other income (expenses)

3. Other income

1,400

2,596

12,481

4. Other expenses(2,261)(1,078)(20,161)

Total other income (expenses)(1,343)

1,111(11,975)

Operating profit (Note 6)

22,633

18,772201,739

1. Interest income (Note 24)

421

478

3,759

2. Dividend income (Note 24)

1,116

927

9,948

Total finance income

1,537

1,405

13,707

1. Interest expenses (Note 24)(2,304)(2,407)(20,538)

2. Other finance costs (Notes 24 & 30)(2,000)(323)(17,832)

Total finance costs(4,304)(2,731)(38,371)VII. Share of profit (loss) of investments accounted forusing the equity method (Note 11)(1,990)675(17,740)

Profit before tax

17,875

18,122

159,334

Income tax expense (Note 29)(7,589)(7,313)(67,645)

Profit for the year

10,286

10,80891,690Owners of the Parent

8,049

8,959

71,748Non-controlling interests

2,237

1,848

19,942

Total

10,286

10,80891,690V. Finance income

VI. Finance costs

Profit for the year attributable to:

Yen

U.S. dollars

Earnings per share attributable to owners of the Parent:
Basic earnings per share (Note 25)

19.13

21.29

0.17

Diluted earnings per share (Note 25)

19.13

21.29

0.17

Continued
3

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(b) Consolidated Statement of Comprehensive Income
JPY2017
I. Profit for the year

USD (Note 2)
2016

2017

10,286

10,80891,6902,671(1,580)23,815

(284)

(426)

(2,532)

24

(14)

222

Total items that will not be reclassified to profit or loss

2,412

(2,021)

21,505

Items that may be reclassified to profit or loss:
1. Exchange differences on translation of foreign
operations (Note 26)(829)(2,894)(7,391)

2. Cash flow hedges (Notes 26 & 30)

984(1,511)8,779

3. Share of other comprehensive income of investments
accounted for using the equity method (Note 26)

109

(127)

980

Total items that may be reclassified to profit or loss

265

(4,532)

2,368

Other comprehensive income for the year, net of tax

2,678(6,554)23,873

Total comprehensive income for the year

12,965

4,253

115,563

Owners of the Parent

10,7203,248

95,559Non-controlling interests

2,244

1,005

20,004

Total

12,965

4,253

115,563

II. Other comprehensive income
Items that will not be reclassified to profit or loss:
1. Financial assets measured at fair value through othercomprehensive income (Note 26)
2. Remeasurement of defined benefit pension plans(Note 26)
3. Share of other comprehensive income of investments
accounted for using the equity method (Note 26)

Total comprehensive income for the year attributable to:

The accompanying notes are an integral part of these consolidated financial statements
4

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
Consolidated Statement of Changes in Equity
JPY
2017

USD (Note 2)
2016

2017

EquityI . Share capital (Note 18)
Balance at the beginning of the year

27,781

27,781

247,626

Balance at the end of the year

27,781

27,781

247,626

26,463

26,621

235,878

Disposition of treasury stock

3

0

28

Equity transactions with non-controlling interests

4

(158)

39

II . Capital surplus (Note 18)
Balance at the beginning of the year

326

－

2,911

26,797

26,463

238,857

Balance at the beginning of the year

29,103

21,879259,415

Dividends(2,314)(1,683)(20,628)

Profit for the year attributable to owners of the Parent

8,049

8,959

71,748

Reclassification from other components of equity

(259)

(11)

(2,310)

－

(40)

－

34,57929,103308,225

Balance at the beginning of the year
Exchange differences on translation of foreign
operations
Financial assets measured at fair value through othercomprehensive income

8,486

14,18575,641(562)(2,346)(5,015)2,613(1,542)

23,299Cash flow hedges

1,004(1,535)

8,955

Remeasurement of defined benefit pension plans

(384)

(286)

(3,428)

Reclassification to retained earnings

259

11

2,310

11,416

8,486

101,762

(235)

(222)

(2,096)

Acquisition of treasury stock

(5)

(12)

(49)

Disposition of treasury stock

22

0

203

Balance at the end of the year

(217)

(235)

(1,942)

100,357

91,599894,527

Other changes
Balance at the end of the year
III . Retained earnings (Note 18)

Other changes
Balance at the end of the year
IV . Other components of equity (Note 26)

Balance at the end of the year
V . Treasury stock (Note 18)
Balance at the beginning of the year

Total equity attributable to owners of the Parent

Continued
5

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
JPY
2017

USD (Note 2)
2016

2017

VI . Non-controlling interests
Balance at the beginning of the year

29,107

28,771

259,448

Dividends to non-controlling interests(1,324)(891)(11,806)

Equity transactions with non-controlling interests

(36)

222

(323)

Other changes
Profit for the year attributable to non-controllinginterests

(484)

－

(4,319)

2,237

1,848

19,942

6

(843)

62

(178)

(650)

(1,587)

82

(53)

738

1

(0)

15

100

(139)

896

29,50629,107

263,003

129,863

120,706

1,157,530

Owners of the Parent

10,7203,248

95,559Non-controlling interests

2,244

1,005

20,004

12,965

4,253

115,563

Other components of equity
Exchange differences on translation of foreign
operations
Financial assets measured at fair value throughother comprehensive income
Cash flow hedges
Remeasurement of defined benefit pension plans
Balance at the end of the year
Total equity
Comprehensive income for the year attributable to:Total comprehensive income for the year

The accompanying notes are an integral part of these consolidated financial statements
6

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
Consolidated Statement of Cash Flows
JPY
2017
I.

USD (Note 2)
2016

2017

Cash flows from operating activities
Profit for the year

10,286

10,80891,690Depreciation and amortization

2,885

3,082

25,720

866

94

7,724

Finance income and costs

2,767

1,326

24,664

Share of (profit) loss of investments accounted for using
the equity method

1,990

(675)

17,740

Impairment loss on property, plant and equipment andintangible assets(Gain) loss on sale or disposal of property, plant andequipment and intangible assets, net

(384)

311

(3,430)

Income tax expense

7,589

7,313

67,645(10,613)

19,262(94,602)200

10,664

1,788

Increase (decrease) in trade and other payables

6,861(17,662)

61,157

Increase (decrease) in retirement benefits liabilities

(120)

274

(1,078)

Other(1,437)

3,812(12,812)Sub total

20,89038,613

186,207

Interest received

436

491

3,890

Dividends received

1,503

1,193

13,404

Interest paid

(2,291)(2,414)(20,427)

Income taxes paid

(8,686)(4,860)(77,426)

11,852

33,024

105,647

Payments for property, plant and equipment(4,188)(1,982)(37,334)

Proceeds from sale of property, plant and equipment

3,424

572

30,525

Payments for intangible assets

(605)

(496)

(5,398)Purchases of other investments(986)(5,054)(8,792)

Proceeds from sale of other investments

733

502

6,539

(12,786)

1,178(113,972)

(6)

(165)

(62)

(Increase) decrease in trade and other receivables(Increase) decrease in inventories

Net cash provided by (used in) operating activities
II. Cash flows from investing activities

Proceeds from (payments for) acquisition ofsubsidiaries (Note 27)
Proceeds from (payments for) sale of subsidiaries(Note 27)
Increase in loans receivable(1,835)(917)(16,363)

Proceeds from collection of loans receivable

1,952

1,005

17,403

Other

(392)

1,142

(3,497)(14,691)(4,214)(130,951)

Net cash provided by (used in) investing activities

Continued
7

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017

JPY
2017

USD (Note 2)
2016

2017

III. Cash flows from financing activities
Increase (decrease) in short-term borrowings, net

7,044(9,718)62,787

Proceeds from long-term borrowings

18,786

18,687

167,452

Repayment of long-term borrowings(28,857)(22,231)(257,216)

－

9,923

－

(2,308)(1,678)(20,574)

(30)

(328)

(271)

(1,277)(897)(11,385)

(262)

(485)

(2,336)

Net cash provided by (used in) financing activities(6,904)(6,729)(61,542)

IV. Increase (decrease) in cash and cash equivalents, net(9,743)22,081(86,846)

V. Cash and cash equivalents at the beginning of the year

87,466

66,485

779,625

VI. Effect of exchange rate changes on cash and cash
equivalents(156)(1,100)(1,392)

VII. Cash and cash equivalents at the end of the year
(Note 27)

77,56687,466

691,387

Proceeds from issuance of bonds
Dividends paid
Payments for acquisition of subsidiaries' interests from
non-controlling interests
Dividends paid to non-controlling interests
Other

The accompanying notes are an integral part of these consolidated financial statements
8

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
1. Reporting Entity
Kanematsu Corporation (the “Company”) is a company located in Japan. The addresses of the Company’s registered headquarters and main
offices are available on its corporate website (http://www.kanematsu.co.jp/en/). The consolidated financial statements of the Company as ofand for the year ended March 31, 2017 comprise the Company and its subsidiaries (collectively, the “Consolidated Group”), and theConsolidated Group’s interests in associates. The Consolidated Group operates its businesses as an integrated trading company by providing
a broad array of products and services through the organic integration of domestic and international business networks; expertise acquired invarious fields; and the functions of a trading company, including commodities trading, information gathering, market exploration, businessdevelopment and organization, risk management, and distribution. Detailed information on the business operations for each reportablesegment are provided in Note 6 Segment Information.

2. Basis of Preparing Consolidated Financial Statements(1) Statement of compliance with IFRSThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) pursuant
to the provision of Article 93 of the Ordinance on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements(Ordinance of the Ministry of Finance No. 28 of 1976) as all the requirements of the “Specified Company for Designated IFRSs” set forth in
Article 1-2 of said Ordinance have been fulfilled.
The consolidated financial statements were authorized by the board of directors meeting on June 23, 2017.

(2) Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis except for:
 financial assets and liabilities measured at fair value through profit or loss, which are measured at fair value; financial assets measured at fair value through other comprehensive income, which are measured at fair value; and defined benefit assets or liabilities, which are measured at the present value of the defined benefit obligations less the fair value of plan
assets.

(3) Functional currency and presentation currency
The consolidated financial statements are presented in Japanese yen, which is the Company’s functional currency. All financial information
presented in Japanese yen has been rounded down to the nearest million.
The U.S. dollar amounts appearing in the consolidated financial statements and the notes thereto represent the arithmetical results oftranslating yen to dollars at the rate of ¥112.19 to U.S.$1.00, the approximate exchange rate prevailing on March 31, 2017. The translation ofsuch dollar amounts is solely for convenience of the readers outside Japan and should not be construed as a representation that the Japanese
yen amounts have been, or could be readily converted, realized or settled in dollars at the above, or any other rate.

(4) Use of estimates and judgments
The preparation of the consolidated financial statements in accordance with IFRSs requires management to make judgments, estimates andassumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results could differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. The effect of a change in an accounting estimate is recognizedin the period of the change and future periods. The following notes include information on critical judgments in the application of accounting
policies that have a significant effect on the amounts recognized in the consolidated financial statements:
 Note 3. Significant Accounting Policies: (1) Basis of consolidation
 Note 3. Significant Accounting Policies: (11) Revenue
The following notes include information on uncertainties of assumptions and estimates that have a significant risk to cause material revisions
in the next fiscal year: Note 22. Impairment Loss
 Note 28. Employee Benefits
 Note 29. Current and Deferred Income Tax
 Note 30. Financial Instruments: (6) Fair value of financial instruments
When measuring the fair value of an asset or a liability, the Consolidated Group uses observable market data as much as it is available. Fairvalues are categorized into the following three hierarchy levels based on the inputs to the valuation techniques: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Consolidated Group can access at themeasurement date Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly Level 3: unobservable inputs
The following notes include detailed information on assumptions made when measuring the fair value:

Continued
9

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
 Note 22. Impairment Loss
 Note 30. Financial Instruments: (6) Fair value of financial instruments

3. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all the periods presented in these consolidated financial statements,and have been applied consistently by the Consolidated Group.

(1) Basis of consolidation
1) Subsidiaries
Subsidiaries are entities which are controlled by the Consolidated Group. The Consolidated Group controls an entity when it is exposed,or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over theentity. When the Consolidated Group holds more than half of the voting rights of another entity, such entity is included in the subsidiariesof the Consolidated Group as it is determined that control exists, unless it can be clearly demonstrated that such ownership does notconstitute control. In addition, even when the Consolidated Group holds only half or less of the voting rights of another entity, such entity
is included in the subsidiaries of the Consolidated Group if it is determined through agreements with other investors that theConsolidated Group has control over such entity’s financial and operating policies and thus has the ability to affect returns from such
entity.
The financial statements of subsidiaries are included in the consolidated financial statements of the Consolidated Group from the date theConsolidated Group obtains control of the subsidiaries until the date it loses such control of the subsidiaries. When the accounting
policies adopted by the subsidiaries are different from those adopted by the Consolidated Group and the difference is considered material,
the financial statements of the subsidiaries are adjusted as necessary.
Changes in the Consolidated Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
The Company recognizes directly in equity any difference between the amounts by which the non-controlling interests are adjusted andthe fair value of the consideration paid or received, and attribute it to the owners of the Company.
If the Consolidated Group loses control of a subsidiary, the Consolidated Group derecognizes the assets and liabilities of the former
subsidiary, and any non-controlling interests and other components of equity related to the former subsidiary. Any gains or losses
arising from such loss of control are recognized in profit or loss. If the Consolidated Group retains any interest in the former subsidiary
after the control is lost, such interest is measured at fair value at the date that control is lost.
2) Associates and joint ventures
Associates are those entities over which the Consolidated Group has significant influence, where significant influence is defined as thepower to participate in the financial and operating policy decisions of the entities but is not control or joint control of those entities. If theConsolidated Group holds between 20 percent and 50 percent of the voting rights of each those entities, it is presumed that theConsolidated Group has significant influence over each of those entities.
Even if the Consolidated Group holds less than 20 percent of the voting rights of another entity, such entity is included in the associatesof the Consolidated Group as long as it is determined that the Consolidated Group has significant influence over the entity through thedispatch of the board members, the shareholders’ agreement or the like.
Joint ventures are those entities with respect to which multiple parties, including the Consolidated Group, have joint control over the
economic activities by contract and unanimous consent of all of such parties is required when deciding on the relevant activities,
whereby the Consolidated Group has rights to the net assets of the arrangement.
Except for those that are classified as assets held for sale in accordance with IFRS 5 Non-current Assets Held for Sale andDiscontinued Operations, investments in associates and joint ventures (“equity method investee”) are measured at the carrying amountfollowing the application of the equity method (including goodwill recognized at the time of acquisition) less any accumulated
impairment losses.
The consolidated financial statements include the Consolidated Group’s share of profit or loss and other comprehensive income of theassociates and joint ventures from the date the Consolidated Group obtains significant influence or joint control until the date it loses
such significant influence or joint control. When the accounting policies adopted by the equity method investees are different from thoseadopted by the Consolidated Group, the financial statements of the equity method investees are adjusted as necessary.
3) Business combinations
Business combinations are accounted for using the acquisition method. The Consolidated Group recognizes goodwill as the sum of thefair value of the consideration transferred, the amounts of any non-controlling interests in the acquiree and the fair value of the acquirer’s
previously held equity interest in the acquiree measured at the acquisition date; less the net of the acquisition-date amounts of theidentifiable assets acquired and the liabilities assumed (generally measured at fair value). When such difference results in a negativebalance, it is immediately recognized in profit or loss. Non-controlling interests are measured either at fair value or at the non-controllinginterests’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. The measurement method to be appliedat the acquisition date is determined on a transaction-by-transaction basis. Acquisition-related costs, which are costs that theConsolidated Group incurs to effect a business combination (excluding costs to issue debt or equity securities), are accounted for as
expenses in the periods in which the costs are incurred, and thus not included in the cost of goodwill. In a business combination achievedin stages, the Consolidated Group remeasures its previously held equity interest in the acquiree at its acquisition-date fair value andrecognizes any gains or losses arising from such remeasurement in profit or loss. Changes in the value of the Consolidated Group’s
equity interest in the acquiree that had been recognized in other comprehensive income prior to the acquisition date are recognized inContinued
10

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
profit or loss, or other comprehensive income, on the same basis as would be required if the Consolidated Group had disposed of thepreviously held equity interest.
4) Transactions eliminated in consolidation
Intragroup balances and transactions, as well as any unrealized gains and losses arising from intragroup transactions, are eliminated when
preparing the consolidated financial statements.

(2) Foreign currency translation
1) Translation of foreign currency transactions
Foreign currency transactions are translated into functional currencies of individual companies using the exchange rates at the dates ofsuch transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated
into functional currencies using the exchange rate at the end of each reporting period. Exchange differences on monetary items arerecognized in profit or loss in the period in which they arise. Non-monetary items that are measured on a historical cost basis in a foreign
currency are translated into the functional currency using the exchange rate at the date of the transaction. Non-monetary items that aremeasured at fair value in a foreign currency are translated into the functional currency using the exchange rates at the date when the fairvalue was measured.
With respect to the exchange differences of a non-monetary item, when a gain or loss on a non-monetary item is recognized in othercomprehensive income, the Consolidated Group recognizes any exchange component of that gain or loss in other comprehensive income.
Conversely, when a gain or loss on a non-monetary items is recognized in profit or loss, the Consolidated Group recognizes any
exchange component of that gain or loss in profit or loss.
2) Translation of foreign operations
The assets and liabilities of foreign operations, including any goodwill and fair value adjustments arising on the acquisition of foreign
operations, are translated using the exchange rate at the end of the reporting period. In addition, income and expenses of foreign
operations are translated using the average exchange rate for the reporting period unless exchange rates fluctuate significantly.
Exchange differences arising from the translation are recognized in other comprehensive income and the cumulative amounts of theexchange differences are included in other components of equity. When the Consolidated Group’s foreign operations are disposed of, thecumulative amounts of the exchange differences related to foreign operations are reclassified to profit or loss when the gain or loss on
disposal is recognized. Based on the application of the exemption clauses under IFRS 1, the Consolidated Group has reclassified thecumulative exchange differences that existed at the transition date to retained earnings.

(3) Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand; demand deposits; and short-term, highly liquid investments with a maturity of
three months or less from the date of acquisition that are readily convertible to known amount of cash and which are subject to an
insignificant risk of changes in value.

(4) Inventories
Inventories are measured at the lower of cost determined by the moving-average method and net realizable value.

(5) Property, plant and equipment
The Consolidated Group uses the cost model to measure an item of property, plant and equipment after initial recognition and carries it at its
cost less any accumulated depreciation and any accumulated impairment losses. The cost of property, plant and equipment include the costdirectly attributable to the acquisition of the asset.
Property, plant and equipment are depreciated using the straight-line method over the estimated useful life of each component thereof. The
ranges of principal estimated useful lives are presented as follows:
Buildings and structures:
Machinery, vehicles, tools, furniture & fixtures:

3 to 50 years
2 to 20 years

Leased assets are fully depreciated over the shorter of the lease term and their estimated useful lives if there is no reasonable certainty that
the Consolidated Group will obtain ownership by the end of the lease term.
The depreciation method, useful life and residual value of an asset are reviewed at least at the end of each reporting period and amended asnecessary.

(6) Goodwill and intangible assets
1) Goodwill
Goodwill is carried at cost less any accumulated impairment losses.
2) Intangible assets
The Consolidated Group uses the cost model to measure an intangible asset after initial recognition and carries it at its cost less any
accumulated depreciation and any accumulated impairment losses.
A separately acquired intangible asset is initially recognized and measured at cost. The cost of an intangible asset acquired in a businesscombination is its fair value at the acquisition date. With respect to an internally generated intangible asset that does not qualify for asset
recognition, expenditures on such an internally generated intangible asset are recognized as expenses when they are incurred. Conversely,

Continued
11

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
the cost of an internally generated intangible asset that qualifies for asset recognition is the sum of expenditures incurred from the datewhen it first meets the recognition criteria.
An intangible asset with a finite useful life is amortized using the straight-line method over its estimated useful life. The Consolidated
Group’s intangible assets with finite useful lives are comprised mainly of software whose estimated useful life is 5 years.
The depreciation method, useful life and residual value of an intangible asset with a finite useful life are reviewed at the end of eachreporting period and amended as necessary.
Certain intangible assets with indefinite useful lives such as carrier shop operating rights are not amortized, but instead tested for
impairment based on the cash-generating unit at least once a year and whenever there is an indication that they may be impaired.

(7) Impairment of non-financial assets
The Consolidated Group assesses at the end of each reporting period whether there is any indication that an asset may be impaired. If any
such indication exists, it estimates the recoverable amount of the asset or the cash-generating unit to which the asset belongs. Goodwill andan intangible asset with an indefinite useful life are tested for impairment annually and whenever there is an indication that such assets may
be impaired. If the carrying amount of an individual asset or the cash-generating unit exceeds its recoverable amount, the carrying amount of
the asset is reduced to its recoverable amount and that reduction is recognized as an impairment loss.
The Consolidated Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized inprior fiscal years for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the Consolidated
Group will estimate the recoverable amount of that asset. If the recoverable amount exceeds the carrying amount of that asset or the
cash-generating unit to which the asset belongs, the carrying amount is increased to its recoverable amount, which is, however, limited up to
the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for theasset in prior fiscal years; and that increase is recognized as a reversal of an impairment loss. An impairment loss recognized for goodwill is
not reversed in a subsequent period.
In addition, because goodwill that forms part of the carrying amount of an investment in an equity method investee is not separately
recognized, it is not tested for impairment separately. If it is indicated that the investment in an equity method investee may be impaired, theentire carrying amount of the investment is tested for impairment as a single asset, by comparing its recoverable amount with its carrying
amount.

(8) Financial instruments
The Consolidated Group has early adopted IFRS 9 Financial Instruments (as amended in July 2014).
1) Financial assets
The Consolidated Group classifies financial assets at initial recognition as financial assets measured at fair value through profit or loss,
financial assets measured at fair value through other comprehensive income or financial assets measured at amortized cost. The
Consolidated Group initially recognizes financial assets measured at amortized cost on the date that they arise and the other financial
assets on the transaction date.
The Consolidated Group derecognizes a financial asset when, and only when (i) the contractual rights to cash flows from the financial
asset expire, or (ii) it transfers the contractual rights to cash flows and substantially all the risks and rewards of ownership of the financial
asset.
(i) Financial assets measured at amortized cost
A financial asset that meets both of the following conditions is classified as a financial asset measured at amortized cost: The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash
flow and, The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal andinterest on the principal amount outstanding.
The Consolidated Group initially recognizes and measures a financial asset measured at amortized cost at its fair value plus any
transaction costs directly attributable to the acquisition of the financial asset. The Consolidated Group subsequently measures it atamortized cost using the effective interest method.
(ii) Financial assets measured at fair value through other comprehensive income
A financial asset that meets both of the following conditions is classified as a financial asset measured at fair value through othercomprehensive income: The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flow and selling
financial assets and,
 The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal andinterest on the principal amount outstanding.
The Consolidated Group initially recognizes and measures a financial asset measured at fair value through other comprehensive
income at its fair value plus any transaction costs directly attributable to the acquisition of the financial asset. The Consolidated
Group subsequently measures it at fair value and recognizes the subsequent changes in fair value as other comprehensive income.
When the financial asset is derecognized, the cumulative gain or loss is reclassified to profit or loss.

Continued
12

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(iii) Equity instruments measured at fair value through other comprehensive income
With regard to a financial asset that has not been classified as either a financial asset measured at amortized cost or a financial asset
measured at fair value through other comprehensive income, and classified as a financial asset measured at fair value throughprofit or loss, IFRS 9 permits an entity to make an irrevocable election to present in other comprehensive income changes in fairvalue of an investment in an equity instrument that is not held for trading. The Consolidated Group makes this election on an
instrument-by-instrument basis.
The Consolidated Group initially recognizes and measures an equity instrument measured at fair value through othercomprehensive income at its fair value plus any transaction costs directly attributable to the acquisition of the financial asset. The
Consolidated Group subsequently measures it at fair value and recognizes the subsequent changes in fair value as othercomprehensive income. When the equity instrument is derecognized, or its fair value substantially decreases, the Consolidated
Group reclassifies the cumulative amount of other comprehensive income to retained earnings and not to profit or loss. Dividends
are recognized in profit or loss.
(iv) Financial assets measured at fair value through profit or loss
A financial asset other than those classified as (i), (ii) and (iii) above is classified as a financial asset measured at fair value throughprofit or loss.
The Consolidated Group initially recognizes and measures a financial asset measured at fair value through profit or loss at its fairvalue and expenses the transaction costs as incurred that are directly attributable to the acquisition of the financial asset. The
Consolidated Group subsequently measures it at fair value and recognizes the subsequent changes in fair value in profit or loss.
2) Impairment of financial assets
The Consolidated Group assesses impairment of financial assets measured at amortized cost and financial assets measured at fair value
through other compressive income based on the expected credit loss approach.
If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, the Consolidated
Group measures the loss allowance for that financial instrument at an amount equal to the 12-month expected credit losses, i.e., theexpected credit losses that result from default events on that financial instrument that are possible within the 12-months after thereporting date. Conversely, if, at the reporting date, the credit risk on that financial instrument has increased significantly since initialrecognition, the Consolidated Group measures the loss allowance for that financial instrument at an amount equal to the lifetime expectedcredit losses, i.e., the expected credit losses that result from all possible default events over the expected life of that financial instrument.
However, the Consolidated Group always measures the loss allowance for trade receivables that do not contain a significant financing
component at an amount equal to the lifetime expected credit losses despite the above requirement.
Detailed information on the assessment of significant increases in credit risk and the measurement of expected credit losses is provided in
Note 30. Financial Instruments: (3) Credit risk management.
3) Financial liabilities
The Consolidated Group classifies financial liabilities at initial recognition as financial liabilities measured at fair value through profit orloss or financial liabilities measured at amortized cost. The Consolidated Group initially recognizes financial liabilities measured atamortized cost on the date that they arise and the other financial liabilities on the transaction date.
The Consolidated Group derecognizes financial liabilities when they are extinguished, i.e., when obligations specified under a contract isdischarged, cancelled or expires.
(i) Financial liabilities measured at amortized cost
The Consolidated Group classified financial liabilities, other than financial liabilities measured at fair value through profit or loss, as
financial liabilities measured at amortized cost. The Consolidated Group initially recognizes and measures a financial liability
measured at amortized cost at its fair value less any transaction costs directly attributable to incurring of the liability, and subsequently
measures it at amortized cost using the effective interest method.
(ii) Financial liabilities measured at fair value through profit or loss
The Consolidated Group initially recognizes and measures a financial liability measured at fair value through profit or loss at its fairvalue, and subsequently measures it at fair value and recognizes subsequent changes in fair value in profit or loss.
4) Derivatives and hedge accounting
In order to hedge the foreign currency fluctuation risk, interest rate fluctuation risk and commodity price fluctuation risk, theConsolidated Group enters into derivative transactions, such as forward exchange transactions, interest rate swap transactions andcommodity futures and forwards transactions.
When initiating a hedge, the Consolidated Group designates and documents the risk management purposes and strategies regarding thehedge relationship and initiation of such hedge. Such documentation includes the designation of the hedging instrument, the hedged itemor transaction, the nature of the risk being hedged and methods of assessing the hedging instrument’s effectiveness in offsetting theexposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Although such hedging is expected to behighly effective in offsetting changes in fair value or cash flows attributable to the hedged risk, it is assessed on an ongoing basis whether
it was actually highly effective throughout the reporting periods for which such hedging was designated.
The Consolidated Group initially recognizes and measures derivatives at fair value and subsequently measures them at fair value andaccounts for subsequent changes in fair value as follows:

Continued
13

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(i) Fair value hedge
The Consolidated Group recognizes the changes in fair value of a derivative used as a hedging instrument in profit or loss, and thechanges in fair value of a hedged item attributable to the hedged risk in profit or loss by adjusting the carrying amount of the hedged
item.
(ii) Cash flow hedge
Of the changes in fair value of a derivative used as a hedging instrument, the portion determined to be effective is recognized in othercomprehensive income and the cumulative amount is included in other components of equity. Conversely, the portion determined to
be ineffective is recognized in profit or loss. The amounts accumulated in other components of equity are reclassified from othercomponents of equity to profit or loss in the same period that the transaction of the hedged item affects profit or loss; provided,
however, that if hedging of a forecast transaction subsequently results in the recognition of a non-financial asset or liability, theamounts accumulated in other components of equity are then accounted for as an adjustment to the initial carrying amount of thenon-financial asset or liability.
When the hedging instrument expires or is sold, terminated or exercised; or when the hedge no longer meets the criteria for thehedge accounting, the Consolidated Group discontinues the hedge accounting prospectively. If the forecast transaction is no longer
expected to occur, the amounts accumulated in other components of equity are reclassified immediately from other components ofequity to profit or loss.
(iii) Derivatives not designated as hedging instruments
The Consolidated Group recognizes the changes in fair value of derivatives not designated as hedging instruments in profit or loss.
5)

Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net amount of such offset is presented in the consolidated statements offinancial position only when the Consolidated Group has a legally enforceable right to offset the recognized amounts and intends either
to settle them on a net basis or realize the assets and settle the liabilities simultaneously.

(9) Provisions
The Consolidated Group recognizes a provision when, only when (a) the Consolidated Group has a present obligation (legal orconstructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required tosettle the obligation; and (c) a reliable estimate can be made of the amount of the obligation.
Where the effect of the time value of money is material, the Consolidated Group recognizes the provision by discounting it using a current
pre-tax discount rate that reflects the risks specific to the liability.

(10) Equity
When the Consolidated Group repurchases the shares of treasury stock, it is measured at cost and is presented as a deduction from equity.
Transaction costs directly attributable to the repurchase of the shares of treasury stock are deducted from capital surplus. When theConsolidated Group sells the shares of treasury stock, the consideration received is recognized as an increase in equity.

(11) Revenue
Revenue is measured at fair value of the consideration received or receivable, net of returned goods, discounts and rebates. If there are
multiple identifiable components in a single transaction, such transaction is separated into components, and revenue is recognized per suchcomponent. Conversely, when the actual economic state cannot be expressed without treating multiple transactions as one unit, revenue isrecognized by treating such multiple transactions as one unit. The recognition standards and presentation method with respect to revenue
are presented as follows:
1) Revenue recognition criteria(i) Sale of goods
Revenue from the sale of goods is recognized when all of the following conditions have been satisfied: the Consolidated Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
 the Consolidated Group retains neither continuing managerial involvement to the degree usually associated with ownership nor
effective control over the goods sold; the amount of revenue can be measured reliably; it is possible that the economic benefits associated with the transaction will flow to the Consolidated Group; and,
 the costs incurred or to be incurred in respect to the transaction can be measured reliably.
(ii) Rendering of services
If results of revenue from the rendering of services can be reliably estimated, such revenue will be recognized in accordance withsuch transaction’s degree of progress as of the fiscal year end. If all of the following conditions are satisfied, it is determined that
results of a transaction can be reliably estimated: the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Consolidated Group; the stage of completion of the transaction at the end of the reporting period can be measured reliably; and,Continued
14

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
 the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, the Consolidated Group
recognizes revenue only to the extent of the expenses recognized that are recoverable.
2) Method of presenting revenue
When the Consolidated Group is acting as a principal in a transaction, revenue is presented in the gross amount received from acustomer. Conversely, when the Consolidated Group is acting as an agent for a third party in a transaction, revenue is presented in theamount of commission, which is the gross amount received by a customer less the amount collected on behalf of the third party.
The following features are considered when determining whether the Consolidated Group is acting as a principal or as an agent in atransaction:
 whether the Consolidated Group has the primary responsibility for providing goods or services to the customer or for fulfilling theorder;
 whether the Consolidated Group has inventory risk before or after receiving the customer order, during shipping or on return; whether the Consolidated Group has latitude in establishing prices, either directly or indirectly;
 whether the Consolidated Group bears the customer’s credit risk for the amounts receivable from the customer; and,
 whether the amounts the Consolidated Group earns are predetermined, being either a fixed fee per transaction or a stated percentage ofthe amounts billed to the customer.

(12) Finance income and finance costs
Finance income comprises interest income, dividend income, gain on sale of financial instruments and gain arising from changes in fairvalue of financial instruments. Interest income is recognized at the time of receipt by using the effective interest method. Dividend income
is recognized on the date when the Consolidated Group’s right to receive payment is established. Finance costs comprise interest expenses,
loss on sale of financial instruments and loss arising from changes in the fair value of financial instruments.

(13) Employee benefits
1) Post-retirement benefits(i) Defined benefit plans
Defined benefit plans are retirement benefit plans other than defined contribution plans. Defined benefit obligations are calculated
separately for each plan by estimating the future amounts of benefits that employees will have earned in return for their services
provided in the current and prior periods, and discounting such amounts in order to determine the present value. The fair value ofany plan assets is deducted from the present value of the defined benefit obligations. The discount rate is determined by reference tothe market yields on highly rated corporate bonds at the fiscal year-end that have maturity terms that are approximately the same as
those of the Consolidated Group’s defined benefit obligations and use the same currencies as those used for future benefits
payments.
When the retirement benefit plans are amended, the change in defined benefit obligations related to past service by employees isimmediately recognized in profit or loss.
The Consolidated Group recognizes the changes in the net defined benefit liability (asset) due to remeasurements in othercomprehensive income and immediately reclassifies them to retained earnings.
(ii) Defined contribution plans
Defined contribution plans are retirement benefit plans under which an employer pays fixed contributions into a separate entity andwill have no legal or constructive obligation to pay further contributions. The obligations already paid or to be paid as contributions
under the defined contribution plans are recognized as expenses in the period in which the employees render the related services.
2) Other long-term employee benefits
The Consolidated Group recognizes obligations for long-term employee benefits other than post-employment benefits as a liability by
estimating the amounts as of the reporting date that will be paid to the employees in return for their services without discounting thatamounts unless it is material.
3) Short-term employee benefits
The Consolidated Group recognizes short-term employee benefits as a liability and an expense by estimating the amounts that will be
paid to the employees in return for their services without discounting those amounts. The Consolidated Group recognizes bonuses to be
paid pursuant to the bonus system as a liability when it has present legal or constructive obligations to pay as a result of past employee
service, and when the amounts of the obligations can be estimated reliably.

(14) Income taxes
Income tax expenses comprises current tax expense and deferred tax expense. The Consolidated Group recognizes them in profit or loss,
except when they arise from items that are recognized in other comprehensive income or directly equity, and from business combinations.
Current tax expense is measured by the expected taxes receivable from or taxes payable to tax authorities, and the tax rates or tax laws thatare used to calculate the tax amount are those that have been enacted or substantially enacted by the end of the fiscal year.
The Consolidated Group recognizes deferred tax assets and deferred tax liabilities for temporary differences between the carrying amountof an asset and liability in the statements of financial position and its tax base, the unused tax losses carried forward and unused tax credits
carried forward. The amounts of deferred tax assets and deferred tax liabilities are calculated by applying the expected tax rate or tax law

Continued
15

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
applicable as of the period in which assets are realized or liabilities are settled in accordance with a statutory tax rate or a substantiallyenacted statutory tax rate and the tax law as of the fiscal year-end. The Consolidated Group does not recognize deferred tax assets anddeferred tax liabilities in the following cases: when taxable temporary differences arise from the initial recognition of goodwill; when they arise from the initial recognition of an asset or a liability in a transaction which is not a business combination; and on thetransaction date, affects neither accounting profit nor taxable profit (tax loss); or, with respect to taxable temporary differences associated with investments in subsidiaries and associates, when the Consolidated Group isable to control the timing of the reversal of the temporary differences; and it is probable that the temporary differences will not reverse in
the foreseeable future.
Deferred tax assets and deferred tax liabilities are offset only when the Consolidated Group has a legally enforceable right to set off thecurrent tax assets against current tax liabilities, and, such deferred tax assets and liabilities relate to income taxes levied on the same
taxation entity. However, even in the case of different taxable entities, the Consolidated Group can set off if the tax taxable entities intend
either to settle current tax liabilities and assets on a net bases, or to realize the assets and settle the liabilities simultaneously. Deferred tax
assets are recognized for deductible temporary differences, the unused tax losses carried forward and unused tax credits carried forward to
the extent that it is probable that they can be used against future taxable profit. The carrying amounts of deferred tax assets are reassessed ateach fiscal year-end, and such carrying amount will be reduced to the extent it is no longer probable that related tax benefits from such
assets will be realized. Unrecognized deferred tax assets are also reassessed at the end of each reporting period and are recognized to theextent that it is probable that future taxable profit will be available to recover the deferred tax assets.
The Company and its wholly owned domestic subsidiaries apply the consolidated tax payment system, by which the Company and its
wholly owned domestic subsidiaries are allowed to file a tax return and pay the corporation tax as a consolidated tax filing group.

(15) Leases
The Consolidated Group determines whether an agreement is, or contains, a lease based on the substance of the agreement at inception of
the lease. The substance of an agreement is assessed based on (a) whether fulfillment of the arrangement is dependent on the use of a
specified asset or assets; and (b) whether the agreement conveys a right to use the asset.
1) Finance lease
A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. The Consolidated
Group initially recognizes a leased asset at the lower of the fair value of the leased asset and the present value of the minimum lease
payments, and subsequently accounts for the lease asset based on the applicable accounting policies. Minimum lease payments areapportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period
during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
2) Operating lease
An operating lease is a lease other than a finance lease. The Consolidated Group recognizes lease payments under an operating lease as
an expense on a straight-line basis mainly over the lease term. When the Consolidated Group is the lessor of assets under an operatinglease, it presents the assets subject to the operating lease in its consolidated statements of financial position.

4. Standards and interpretations issued but not yet adopted
The following are the major standards and interpretations that have been newly issued or amended prior to the date of authorization forissuance of the consolidated financial statements. The Consolidated Group has not yet adopted these standards for the fiscal year ended
March 31, 2017. The effects of application of these standards on the Consolidated Group are currently under assessment and cannot be
estimated as of the filing date.

Standard

IFRS 15

Title

Mandatory application

Fiscal year in which the(from fiscal years

Consolidated Group will

beginning on or after)

apply the standard
Fiscal year ending

Revenue from Contracts
with Customers

January 1, 2018

LeasesJanuary 1, 2019

March 31, 2019
Fiscal year ending

IFRS 16

March 31, 2020

Continued
16

Summary of new or amended standard

Amendment of accounting treatment for anddisclosure on revenue recognition

Amendment of accounting treatment forlease contracts

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
5. Business Combinations
There were no major business combinations that occurred during the fiscal year ended March 31, 2016.
The major business combination that occurred during the fiscal year ended March 31, 2017 is described as follows:(1) Contents of the business combination
Name of the acquired company
Contents of business
Date of the business combination
Legal form of the business combination

Company name after the combination
Percentage of the voting rights acquired

Diamondtelecom, Inc.
Information communication business involved with sales of mobile communication devices
and systems
April 1, 2016
Acquisition of the shares of Diamondtelecom, Inc. by Kanematsu Telecom Investment Co.,
Ltd., a wholly owned subsidiary of the Company. (Kanematsu Telecom Investment Co., Ltd.
absorbed the acquired company as of April 1, 2016 and changed its company name to
Diamondtelecom, Inc.)
Diamondtelecom, Inc.
100.0%(2) Purpose of the business combination
The mobile business of the Consolidated Group is driven mainly by Kanematsu Communications Limited (“Kanematsu Communications”), a
wholly owned subsidiary of the Company. With its large market share in the mobile phone sales distribution industry, the mobile business is
one of the core businesses as well as one of the focus areas under the Consolidated Group’s medium-term vision, VISION-130.
Diamondtelecom, Inc. (“Diamond Telecom”) has been engaging in the mobile phone sales business for more than 20 years since its
foundation in 1994 as a wholly owned subsidiary of Mitsubishi Electric Corporation, and owns a dominant number of carrier-certified shops
throughout Japan.
As a result of the acquisition of Diamond Telecom, the Consolidated Group’s total sales volume combining the sales of the two companies
will reach the industry’s top class, and we expect that this will significantly enhance our presence in the mobile phone sales distribution
industry.
We also believe that the integration of Diamond Telecom will enable us to create synergies in the Consolidated Group as the Kanematsu
Communications’ network of carrier-certified shops will be complemented and strengthened by the addition of Diamond Telecom’s network
and achieve a national network of blue-chip shops, service sophistication through shared human resources and know-how and theenhancement of management efficiency for both companies.

(3) Acquisition costs and the detail
JPY

Acquisition costs (cash consideration)

USD

17,400155,094(4) Acquisition-related costs and its line item
Acquisition-related costs for the business combination were ¥168 million ($1,498 thousand), and they were recognized in selling, generaland administrative expenses in the consolidated statement of income of the fiscal year ended March 31, 2016.

(5) Assets and liabilities on the day of the business combination
JPY

USD

Fair value of the consideration paid

17,400155,094

Cash and cash equivalents
Trade receivables
Inventories
Other current assets
Property, plant and equipment
Goodwill (Note)
Intangible assets
Other non-current assets
Current liabilities
Non-current liabilities
Total

4,613
12,82841,122
114,343

1,212
351
736
1,635
13,930764(17,746)(925)

10,806
3,132
6,561
14,576
124,170
6,817(158,179)(8,252)

17,400155,094(Note) Goodwill consists primarily of future economic benefits and synergies with the Consolidated Group’s existing businesses.
The total amount of goodwill that is expected to be deductible for tax purposes is ¥12,918 million ($115,151 thousand).

Continued
17

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(6) Effects on cash flows through business combination
Payments for acquisition costs (cash consideration)
Cash and cash equivalents on the acquisition date
Payments for acquisition of subsidiaries shares

JPY

USD

(17,400)
4,613(12,786)(155,094)
41,122(113,972)(7) Period of the performance of the acquired company in the consolidated financial statements
The performance of Diamond Telecom from April 1, 2016 to March 31, 2017 is included in the consolidated financial statements.

(8) Earnings since the acquisition date
JPY

Revenue
Profit27,800161

USD
247,798
1,439

There is no pro forma information presented since the business combination occurred at the beginning of the period.

6. Segment Information(1) Overview of Reportable Segments
The reportable segments of the Consolidated Group are components of the Consolidated Group for which discrete financial information isavailable and are reviewed by the Board of Directors of the Company normally and regularly assesses its business performance and examines
the allocation of management resources.
The Consolidated Group offers a broad array of merchandise and services, using expertise in each business field and trading function fromJapan and its international network. Trading functions include commercial trade, information gathering, market development, businessdevelopment and arrangement, risk management and logistics.
The Consolidated Group therefore consists of merchandise and service segments based on its business units: “Electronics & Devices”,“Foods & Grain”, “Steel, Materials & Plant”, and “Motor Vehicles & Aerospace”.
The principal merchandise and services handled by each segment are presented as follows:(Electronics & Devices)
The Electronics & Devices segment provides a wide range of products including electronic parts and components, semiconductor and LCD
manufacturing equipment, materials and indirect materials related to electronics, coupled with development and proposal services. This
segment also conducts retail sales of electric cells, LED, etc. and deals with mobile communications terminals, mobile internet systems, andinformation and telecommunication equipment and security equipment and services.
(Foods & Grain)
The Foods & Grain segment integrates the handling of a broad array of food and foodstuffs, with operations ranging from sourcing raw
materials reliably to providing food and foodstuffs, including high value-added products. Merchandise in this segment includes cooked foods,
processed fruits, processed agricultural products, beverage ingredients, animal and fishery products, wheat, rice, soybeans, feedstuff and pet
foods.
(Steel, Materials & Plant)
The Steel, Materials & Plant segment operates the domestic and international trade of general steel products including steel plates, bars andwire rods, pipes, and stainless products, carries out overseas projects such as plant and infrastructure development, and sells machine tools
and industrial machinery. Additionally, this segment operates the domestic and international trade of crude oil, petroleum products, LPG,
functional chemicals and food products, pharmaceuticals and pharmaceutical intermediates, and other products. It also develops
environmental materials such as heat shield paints and new technologies, and operates businesses related to emissions rights.
(Motor Vehicles & Aerospace)
The Motor Vehicles & Aerospace segment primarily operates international trade of aircrafts and aircraft parts, satellite- and aerospace-related
products, automobiles, motorcycles and related parts, industrial vehicles, construction machinery, etc., and also provides products with added
value based on demand or use.

Continued
18

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(2) Information on reportable segments
The accounting methods for the reportable operating segments are largely consistent with those stated in Note 3. Significant Accounting
Policies. Inter-segment revenue and transfers are based on the transaction prices to external customers.
Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)(JPY)
Reportable segment
Electronics& Devices
Revenue
External
Inter-segment
Total revenue
Segment profit
Other profit or loss:
Depreciation andamortization
Share of profit (loss) ofinvestments accounted
for using the equity
methodSegment assets
Other assets:
Investments accounted
for using the equity
methodCapital expenditures

Steel,

Motor

Materials &Vehicles &Plant

Aerospace

Foods &
Total

Grain

OthersAdjustment(Note 1)

(Note 2)

Consolidated

254,280359
254,640
14,348

227,7644
227,7692,489

131,20154
131,256
2,820

50,419050,4192,223

663,664419
664,084
21,881

11,91462
11,977
756

－
(481)
(481)
(5)

675,579－
675,579
22,633

1,202

601

620

333

2,758

142

(15)

2,885

(2,494)

103

13

31

(2,346)355－(1,990)173,258

106,057

111,957

36,738428,012

10,293

41,412479,717

531

1,354

71

308

2,266

2,233

385

4,885

1,548

376

164

2,537

4,627

129

213

4,970

Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)(USD)
Reportable segment

Revenue
External
Inter-segment
Total revenue
Segment profit
Other profit or loss:
Depreciation andamortization
Share of profit (loss) ofinvestments accounted
for using the equity
methodSegment assets
Other assets:
Investments accounted
for using the equity
methodCapital expenditures

Electronics

Foods && Devices

Grain

Steel,

Motor

Materials &Vehicles &Plant

Aerospace

Total

OthersAdjustment(Note 1)

(Note 2)

Consolidated

2,266,518
3,204
2,269,722
127,892

2,030,164
44
2,030,208
22,187

1,169,455
489
1,169,944
25,144449,4080449,408
19,817

5,915,545
3,737
5,919,282
195,040

106,204
559
106,762
6,747－(4,296)(4,296)(48)

6,021,748－
6,021,748
201,739

10,717

5,362

5,530

2,976

24,585

1,270

(136)

25,720(22,238)

926

122

278

(20,912)

3,172－(17,740)

1,544,332

945,339

997,926

327,469

3,815,065

91,747369,129

4,275,941

4,734

12,076640

2,753

20,203

19,9093,434

43,546

13,807

3,359

1,464

22,617

41,247

1,155

1,899

44,301(Notes) 1 The “Others” column is a business segment that is not included in the reportable segments and includes the logistics and insurance
service business and the geotech business.
2 Adjustments are presented as follows:(1) Adjustment for segment profit of ¥(5) million ($(48) thousand) includes inter-segment elimination of ¥(5) million ($(48)thousand).
(2) Adjustment for segment assets of ¥41,412 million ($369,129 thousand) includes inter-segment elimination of ¥(13,794) million($ (122,954) thousand) and corporate assets of ¥55,206 million ($492,083 thousand) that are not allocated to any reportable

Continued
19

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017segment. The corporate assets consist mainly of cash and bank deposits associated with financing activities and assets such as
investment securities.
(3) Adjustment for depreciation and amortization of ¥(15) million ($(136) thousand) includes inter-segment elimination of ¥(15)
million ($(136) thousand).
(4) Adjustment for investments accounted for using the equity method of ¥385 million ($3,434 thousand) includes inter-segment
elimination of ¥(2) million ($(23) thousand) and corporate assets of ¥387 million ($3,458 thousand) that are not allocated to any
reportable segment.
(5) Adjustment for capital expenditures of ¥213 million ($1,899 thousand) includes inter-segment elimination of ¥(22) million($(204) thousand) and corporate assets of ¥235 million ($2,103 thousand) that are not allocated to any reportable segment. The
corporate assets consist mainly of lease equipment related to the information system of the subsidiary.
Fiscal year ended March 31, 2016 (from April 1, 2015 to March 31, 2016)(JPY)
Reportable segment
Steel,

Motor

Materials &Vehicles &Plant

Aerospace

Electronics &Foods & Grain

Depreciation andamortization
Share of profit (loss) ofinvestments accounted forusing the equity method
Segment assets
Other assets:
Investments accounted forusing the equity method
Capital expenditures

Adjustment(Note 1)

(Note 2)

Consolidated

Total

Devices
Revenue
External
Inter-segment
Total revenue
Segment profit
Other profit or loss:

Others235,028220
235,249
10,658

222,5772
222,579
1,427

135,26956
135,325
3,388

63,792
063,792
2,964

656,667279
656,947
18,43911,70668
11,774
329

－
(347)
(347)
4

668,374－
668,374
18,772

1,036

621

929

364

2,951

141

(10)

3,082

278

77

13

34

403

271

－

675

152,348

110,116

102,204

25,172389,842

9,907

43,842443,592

3,918

1,208

50

332

5,509

1,913

(2)

7,420

1,604

439

527

278

2,850

117

258

3,226

(Notes) 1 The “Others” column is a business segment that is not included in the reportable segments and includes the logistics and insurance
service business and the geotech business.
2 Adjustments are presented as follows:(1) Adjustment for segment profit of ¥4 million includes inter-segment elimination of ¥4 million.
(2) Adjustment for segment assets of ¥43,842 million includes inter-segment elimination of ¥(11,964) million and corporate assets of¥55,807 million that are not allocated to any reportable segment. The corporate assets consist mainly of cash and bank deposits
associated with financing activities and assets such as investment securities.
(3) Adjustment for depreciation and amortization of ¥(10) million includes inter-segment elimination of ¥(10) million.
(4) Adjustment for investments accounted for using the equity method of ¥(2) million includes inter-segment elimination of ¥(2)
million.
(5) Adjustment for capital expenditures of ¥258 million includes inter-segment elimination of ¥(71) million and corporate assets of¥329 million that are not allocated to any reportable segment. The corporate assets consist mainly of software related to theinformation system of the Company.
Adjustments from segment profit (operating profit) to profit before tax presented in the consolidated statements of income arepresented as follows:
USD
2017

JPY
2017

2016

Segment profit

22,633

18,772201,739

Finance income and finance costs(2,767)(1,326)(24,664)

Share of profit (loss) of investments accounted
for using the equity method(1,990)675(17,740)

Profit before tax

17,875

18,122

159,334

Continued
20

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(3) Information on products and services
This disclosure is omitted because the classification of products and services is the same as that of reportable segments.

(4) Geographic information
1)

External revenue
JPY
2017

Japan
Asia
North America
EuropeOthers2016
575,263
46,62036,748
12,771
4,176
675,579

Total

542,333
62,18543,571
13,598
6,685
668,374

USD
2017
5,127,582
415,547
327,558
113,835
37,226
6,021,748

Revenue is classified by country or region based on the locations of customers.
2)

Non-current assets (excluding financial assets and deferred tax assets)
JPY
2017

Japan
Asia
North America
EuropeOthers48,204
990
4,946
3,731
33
57,906

Total

USD
2017

2016
34,464
1,046
5,432
2,092
39
43,076429,670
8,831
44,08833,265296
516,150(5) Information on major customers
There is no customer whose transaction volume is equal to or more than 10% of the Consolidated Group’s revenue for the fiscal years ended
March 31, 2017 and March 31, 2016.

7. Trade and Other Receivables
The breakdown of trade and other receivables is presented as follows:
JPY
2017
Notes and accounts receivable
Loans receivable
Other
Less: loss allowance
Total
Current assets
Non-current assets
Total

2016
186,705
3,078
4,718(2,139)192,363
191,193
1,169
192,363

159,173
3,019
4,190(2,383)164,001
163,540460
164,001

USD
2017
1,664,187
27,44442,057(19,066)
1,714,621
1,704,195
10,425
1,714,621

Information on changes in loss allowance is provided in Note 30. Financial Instruments: (3) Credit risk management.

8. Inventories
The breakdown of inventories is presented as follows:
JPY
2017
Merchandise and finished goods
Raw materials and supplies
Work in progress
Total

USD
2017

2016
77,856
1,972
833
80,662

76,8992,328
967
80,195693,968
17,5807,430
718,977

The amounts of inventories that were recognized as expense during the fiscal year ended March 31, 2017 and March 31, 2016 are ¥558,429
million ($4,977,533 thousand) and ¥561,989 million, respectively.
The amount of reversal of write-downs on inventories that was recognized as income during the fiscal year ended March 31, 2017 is ¥164
million ($1,464 thousand), and the amount of write-downs on inventories that was recognized as expense during the fiscal year ended March
31, 2016 is ¥820 million.

Continued
21

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
9. Property, Plant and Equipment
Changes in costs, accumulated depreciation and accumulated impairment losses of property, plant and equipment are presented as follows:[Costs](JPY)

16,371
652
419
357
(520)
(96)

Machinery,
vehicles, tools,
furniture andfixtures26,7811,380
3369(1,965)
(456)

(594)

(214)

－

－

(808)

(112)
16,476467
501
11(1,037)(36)

60
25,9593,616
230
57(1,952)(83)(1,372)
12,545－－－(1,954)
(18)

(43)
484
211
4
(68)
(0)
(1)

(1,468)55,466
4,295
736－(4,946)
(139)

(2)

(8)

－

－

(11)

60
16,439155
27,974－
10,572

(41)
588

175
55,575

Buildings andstructures
As of April 1, 2015
Acquisitions
Acquisitions through business combinations
Transfers from construction in progress
Disposals
Exchange differences
Increases (decreases) due to a change in thescope of consolidation
Other
As of March 31, 2016
Acquisitions
Acquisitions through business combinations
Transfers from construction in progress
Disposals
Exchange differences
Increases (decreases) due to a change in thescope of consolidation
Other
As of March 31, 2017

Construction inprogressLand
14,114
－
326
－
(468)
(54)

985
309
－
(727)
－
(39)

Total
58,253
2,342
749－(2,954)(647)[Accumulated depreciation and accumulated impairment losses](JPY)
Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures(9,860)(19,065)

Depreciation(547)

Impairment losses(15)

Disposals

Construction inprogress

Land

Total

(360)

－

(29,287)(1,652)－－(2,199)

(2)

(64)

－

(81)

428

1,599

－

－

2,028

Exchange differences

23

224

－

－

247

Increases (decreases) due to a change in thescope of consolidation

321

208

－

－

529

Other

98

82

－

－

181

As of April 1, 2015

(9,551)(18,605)(425)－(28,582)

Depreciation(355)(1,611)－－(1,966)

Impairment losses

(37)

(4)

(132)

－

(173)

Disposals

290

1,117

519

－

1,928

Exchange differences

6

103

－

－

109

Increases (decreases) due to a change in thescope of consolidation

0

6

－

－

7

(16)

(22)

－

－

(39)

(9,663)(19,016)(37)－(28,717)

As of March 31, 2016

Other
As of March 31, 2017

Continued
22

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
[Carrying amount](JPY)
Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

As of March 31, 2016

6,924

7,354

12,119484

26,883As of March 31, 2017

6,776

8,958

10,534588

26,858

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures146,859

231,391

111,8214,323

494,394

Acquisitions

4,169

32,237－

1,882

38,289Acquisitions through business combinations

4,469

2,051

－

40

6,561

Construction inprogress

Land

Total

[Costs](USD)

As of March 31, 2016

Construction inprogress

Land

Total

98

515

－

(613)

－

(9,252)(17,408)(17,421)(8)(44,088)

Exchange differences

(324)

(744)

(165)

(9)

(1,242)

Increases (decreases) due to a change in thescope of consolidation

(25)

(78)

－

－

(103)

Transfers from construction in progress
Disposals

Other
As of March 31, 2017

541

1,388

－

(368)

1,561

146,536

249,352

94,236

5,247

495,371[Accumulated depreciation and accumulated impairment losses](USD)
Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

As of March 31, 2016

(85,137)(165,841)(3,790)－(254,768)

Depreciation(3,164)(14,368)－－(17,532)

Construction inprogress

Land

Total

Impairment losses

(337)

(36)

(1,177)－(1,550)

Disposals

2,593

9,964

4,631

－

17,189Exchange differences

59

920

－

－

979

Increases (decreases) due to a change in thescope of consolidation

3

60

－

－

63

(149)

(202)

－

－

(351)

(86,133)(169,502)

(335)

－

(255,970)

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures60,403

79,849Other
As of March 31, 2017

[Carrying amount](USD)

As of March 31, 2017

Land

93,900Construction inprogress
5,247

Total

239,400

The amounts of expenditures relating to property, plant and equipment under construction are presented in the table above as “Construction inprogress”.
Depreciation for property, plant and equipment are included in “Cost of sales” and “Selling, general and administrative expenses” in the
consolidated statement of income.

Continued
23

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
10. Goodwill and Intangible Assets(1) Goodwill
1)

Costs, accumulated impairment losses and carrying amount
Changes in costs, accumulated impairment losses and carrying amount of goodwill are presented as follows:[Costs]JPY
2017
Balance at the beginning of the year
Acquisitions through business combinations
Exchange differences
Balance at the end of the year

USD
2017

2016
5,387
1,842
(25)
7,203

5,249
277
(139)
5,387

48,022
16,420(230)
64,212[Accumulated impairment losses]
JPY2017
Balance at the beginning of the year
Impairment losses
Exchange differences
Balance at the end of the year

USD
2017

2016
(756)
(143)
－
(899)

(756)
－
－
(756)

(6,740)(1,275)－(8,015)[Carrying amount]

JPY
2017
Carrying amount

2)

USD
2017

2016
6,304

4,631

56,197

Impairment test
The Consolidated Group’s cash-generating units to which goodwill has been allocated are tested for impairment annually, and whenever
there is an indication that the Consolidated Groups may be impaired. The carrying amount of significant goodwill allocated to theConsolidated Group’s cash-generating units was as follows:

JPY
2017
Electronics & Devices segment
Electronics business of the domestic
subsidiaries
Mobile business of the domestic subsidiaries
Foods & Grain segment
Pet-related businesses of the domestic
subsidiaries
Steel, Materials & Plant segment
Oilfield tubing business of the foreignsubsidiaries

USD
2017

2016
1,763

1,763

15,716

1,635－

14,576

426

569

3,798

2,271

2,300

20,250

The recoverable amounts of the Consolidated Group’s cash-generating units to which significant goodwill has been allocated were
calculated based on its value in use founded on the five-year forecast that was approved by management.
The five-year forecast of cash flows is based on future plans reflecting past performance. In addition, the main assumption used todetermine such forecast was the growth rates of gross profits through such terms, such growth rates being consistent with the forecasts of
the nominal GDP growth rates or the like of the countries in which such Consolidated Group’s cash-generating units are situated. The
ultimate growth rates are determined by considering the average long-term growth rates of the markets or countries to which theConsolidated Group’s cash-generating units belong.
The pre-tax discount rates which were used in calculating the value in use of the Consolidated Group’s cash-generating units to whichsignificant goodwill has been allocated were as follows:
2017
Electronics & Devices segment
Electronics business of the domestic subsidiaries
Mobile business of the domestic subsidiaries
Foods & Grain segment
Pet-related businesses of the domestic subsidiaries
Steel, Materials & Plant segment
Oilfield tubing business of the foreign subsidiaries

2016
3.3%
7.2%

3.4%
－

5.7%

6.3%

13.0%

12.0%

Continued
24

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
With respect to goodwill that has been allocated to the Consolidated Group’s cash-generating units, the recoverable amount of such
goodwill largely exceeds its carrying amount. Thus, even if major assumptions are changed to a reasonable extent, it is unlikely that suchchanges in major assumptions will reduce the recoverable amounts of the Consolidated Group’s cash-generating units below the carrying
amount.

(2) Intangible assets
Changes in costs, accumulated amortization and accumulated impairment losses of intangible assets are presented as follows:[Costs]
（JPY）

8,174
656

Carrier shop operatingrights3,291－

4Software
As of April 1, 2015
Acquisitions
Acquisitions through businesscombinations
Disposals
Exchange differences
Other
As of March 31, 2016
Acquisitions
Acquisitions through businesscombinations
Disposals
Exchange differences
Other
As of March 31, 2017

Other

Total
4,968
37

16,434

－

9

14

(161)
(32)
(4)
8,636
609

－
－
－
3,291
－

(45)
(235)
(242)
4,492
4

(207)
(267)
(246)
16,42168

13,849－13,917

(728)
(3)
13
8,596

－
－
－
17,140

(55)
(18)
4
4,427

(784)
(21)
18
30,164

693

614[Accumulated amortization and accumulated impairment losses]（JPY）
Software
As of April 1, 2015
Amortization
Impairment losses
Disposals
Exchange differences
Other
As of March 31, 2016
Amortization
Impairment losses
Disposals
Exchange differences
Other
As of March 31, 2017

(6,361)
(571)
－
140
25
(4)
(6,771)
(568)
(688)
654
3
(12)
(7,383)Carrier shop operatingrights
(234)
－
－
－
－
－
(234)
－
－
－
－
－
(234)

Other

Total
(1,196)
(373)
(12)
35
57
158
(1,331)
(331)
(4)
55
0
(0)
(1,611)(7,792)
(944)
(12)
175
82
153
(8,337)
(899)
(692)
709
3
(12)
(9,228)[Carrying amount]（JPY）
Software
As of March 31, 2016
As of March 31, 2017

1,864
1,213

Carrier shop operatingrights
3,057
16,906

Continued
25

Other

Total
3,161
2,816

8,083
20,935

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
[Costs]（USD）

76,982
5,432

Carrier shop operatingrights29,341－606(6,490)(29)
12376,624

Software
As of March 31, 2016
Acquisitions
Acquisitions through businesscombinations
Disposals
Exchange differences
Other
As of March 31, 2017

Other

Total
40,04641

146,369
5,474

123,442－

124,049－－－
152,784

(499)
(163)
38
39,463(6,989)(192)
161
268,871[Accumulated amortization and accumulated impairment losses]（USD）
Software
As of March 31, 2016
Amortization
Impairment losses
Disposals
Exchange differences
Other
As of March 31, 2017(60,359)(5,064)(6,136)
5,832
29
(110)
(65,809)

Carrier shop operatingrights(2,090)－－－－－(2,090)

Other

Total
(11,869)(2,952)
(38)
494
4
(0)
(14,361)(74,318)(8,017)(6,174)
6,326
33
(110)
(82,260)[Carrying amount]（USD）
Software
As of March 31, 201710,815Carrier shop operatingrights150,694

Other

Total
25,101

186,611

The carrier shop operating rights were recognized as intangible assets upon acquisition of the mobile business by the consolidated subsidiary of
the Company. As the rights are expected to exist fundamentally as long as the business continues, they are determined to be classified as
intangible assets with indefinite useful lives.
The recoverable amounts of the Consolidated Group’s cash-generating units including the carrier shop operating rights were calculated based on
its five-year forecast’s value in use that was approved by management. The five-year forecast of cash flows is based on the future plans
anticipated based on past performance. In addition, the main assumption used to determine such forecast was the growth rates of gross profits
through such terms, such growth rates being consistent with the forecasts of the nominal GDP growth rates or the like of the countries in whichsuch Consolidated Group’s cash-generating units are situated. The ultimate growth rates are determined by considering the average long-term
growth rates of the markets or countries to which the Consolidated Group’s cash-generating units belong.
There were no material internally-generated intangible assets as of March 31, 2017 and March 31, 2016.
Amortization expenses are included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated statement ofincome.
The discount rates before tax used to determine the value in use of the Consolidated Group’s cash-generating units are presented as follows:
2017

2016

Electronics & Devices segment
Mobile business of the domestic subsidiaries

7.0%

6.0%

With respect to the carrier shop operating rights, the recoverable amounts of the Consolidated Group’s cash-generating units largely exceed theircarrying amounts. Thus, even if major assumptions are changed to a reasonable extent, it is unlikely that such changes in major assumptions will
reduce the recoverable amounts of the Consolidated Group’s cash-generating units below the carrying amount.

Continued
26

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
11. Interests in Associates and Joint Ventures
There are no associates or joint ventures that are material to the Consolidated Group.
The aggregate amounts of interests in individually immaterial associates and joint ventures that are accounted for using the equity method
are presented as follows:[Aggregate carrying amount]
JPY
2017

USD
2017

2016

Associates
Joint ventures

4,497
387

7,420
－

40,0883,458[Profit or loss from continuing business]
JPY
2017
Associates
Joint ventures

USD
2017

2016
(1,990)
(21)

675
－

(17,740)(190)[Other comprehensive income]
JPY
2017

USD
2017

2016

Associates
Joint ventures

134
－

(141)
－

1,203
－

[Total comprehensive income]
JPY
2017
Associates
Joint ventures

USD
2017

2016
(1,855)
(21)

533
－

(16,538)(190)

12. Other Investments
The breakdown of other investments is presented as follows:
JPY
2017
Financial assets measured at fair value
through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortized cost
Total

USD
2017

2016
5,054

5,637

45,05328,06324,897250,140

994
34,112

1,000
31,5358,864
304,057

13. Other Current Assets and Other Non-current Assets
The breakdown of other current assets and other non-current assets is presented as follows:
JPY
2017
Advance payments
Prepaid expenses
Other
Total
Current assets
Non-current assets
Total

USD
2017

2016
10,5674,299
7,141
22,00818,2003,807
22,008Continued
27

5,739
3,908
6,606
16,253
12,776
3,477
16,253

94,19238,32363,658196,173
162,232
33,941
196,173

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
14. Trade and Other Payables
The breakdown of trade and other payables is presented as follows:
JPY
2017
Notes and accounts payable
Import bills payable
Accounts payable - commission
Total
Current liabilities
Non-current liabilities
Total

USD
2017
1,075,613
294,079
101,129
1,470,822
1,470,822－
1,470,822

2016
120,673
32,992
11,345
165,011
165,011－
165,011102,276
31,034
8,832
142,143
142,143－
142,143

15. Bonds and Borrowings
The breakdown of bonds and borrowings is presented as follows:

2017

Short-term borrowings
Current portion of long-termborrowings
Bonds (excluding the current portion)
Long-term borrowings (excluding thecurrent portion)
Total
Current liabilities
Non-current liabilities
Total

Averageinterest rate
(Note)

2016

Maturity date

JPY
40,402

USD
360,127

JPY
33,3740.97%－

24,240216,069

28,615

1.20%

－

9,945

88,652

9,925

－

－

1.30%

59,255528,172

64,952

133,844
64,643
69,201
133,844

1,193,021
576,197
616,824
1,193,021

136,867
61,98974,877
136,867

August 2018 to October 2029

(Note) The “average interest rate” is presented as the weighted average interest rate against the borrowings outstanding at the end of the fiscal
year. For the purpose of avoiding the interest rate fluctuation risk for borrowings hedged by derivative transactions, such as interest rate
swaps, the average interest rate is calculated using the interest rate after hedging. The interest rate for bonds is presented in the “Detailsof bonds” below.
[Details of bonds]
IssuerKanematsu
Corporation
Kanematsu
Corporation

Bond Name
Unsecured Straight
Bonds No 1
(3-year bonds)
Unsecured Straight
Bonds No 2(5-year bonds)

Issue date

2017
JPY

USD

2016
JPY

Coupon rate

Collateral Maturity date

March 10,
2016

4,974

44,341

4,961

0.40% per annum

None

March 8, 2019

March 10,
2016

4,971

44,3114,964

0.64% per annum

None

March 10,2021

(Note) The maturity schedule of bonds (excluding the current portion) within 5 years after the end of the current fiscal year is presented asfollows:

Corporate bonds

Over one year andwithin two years
JPY
USD
4,974
44,341

Over two years andwithin three years
JPY
USD
－
－

Continued
28

Over three years andwithin four years
JPY
USD
4,971
44,311

Over four years andwithin five years
JPY
USD
－
－

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201716. Provisions
Changes in provisions are presented as follows:
（JPY）
Other

As of April 1, 2016
Provisions madeProvisions used
Provisions reversed
Unwinding of discountForeign exchange translation differences
As of March 31, 2017

Asset retirement obligations
922
68
(26)
－
18
－
981

Other

As of April 1, 2016
Provisions madeProvisions used
Provisions reversed
Unwinding of discountForeign exchange translation differences
As of March 31, 2017

Asset retirement obligations
8,219
608
(240)
－
164
－
8,750

Total
382
92
(14)
(8)
－
(6)
444

1,304
160
(41)
(8)
18
(6)
1,426
（USD）
Total

3,408
822
(127)
(79)
－
(62)
3,961

11,626
1,429
(367)
(79)
164
(62)
12,711

The current and non-current portions of provisions are presented as follows:
JPY
2017
Current liabilities
Non-current liabilities
Total

USD
2017

2016
28
1,397
1,426

31
1,272
1,304

251
12,46012,711

Asset retirement obligations are obligations for restoring offices and shops in accordance with provisions of the property leasing contracts.
While these expenditures will be made after at least one year has passed, the amounts may be affected by the future business plan and otherfactors.

17. Other Current Liabilities and Other Non-current Liabilities
The breakdown of other current liabilities and other non-current liabilities is presented as follows:
JPY
2017
Advances received
Accrued expenses
Unearned revenue
Other
Total
Current liabilities
Non-current liabilities
Total

USD
2017

2016
11,854
3,343
2,918
8,788
26,90526,291
614
26,905

6,515
3,351
2,958
7,339
20,164
19,465699
20,164

105,667
29,80626,01378,337
239,823
234,3485,475
239,823

18. Equity(1) Capital management
The Consolidated Group has a basic policy of increasing shareholders’ equity (See Note 1) up to a certain level and strengthening its
financial base to enhance its enterprise value through building new businesses and increasing revenues while maintaining a sound financial
position. In addition, the Company uses net DER (See Note 2) as a key indicator for capital management.
The Consolidated Group will strive to expand its business to the extent allowed by its own financial strength with the target net DER to be
kept under 1.0, as per the medium-term vision “VISION-130”, for which the revision was made and announced on May 10, 2016. These
indices are periodically reported to and monitored by management.
(Note 1) Shareholders’ equity is defined as equity attributable to owners of the Parent.
(Note 2) Net DER is defined as a ratio of net interest-bearing debt to shareholders’ equity, while net interest-bearing debt is the total amountof interest-bearing debt less cash and cash equivalents.

Continued
29

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
The figures of net DER as of March 31, 2017and March 31, 2016 are presented as follows:
2017

2016

Net DER

0.6

0.5

The Consolidated Group is not subjected to any externally imposed capital requirements (except for general requirements, such as those in
the Companies Act).

(2) Number of shares authorized to be issued, issued shares and shares of treasury stock(Unit: share)
2017
Shares authorized to be issued(No-par common stock)
Issued shares(No-par common stock)
Balance at the beginning of the year
Changes during the period
Balance at the end of the year
Treasury stock(No-par common stock)
Balance at the beginning of the year
Balance at the end of the year2016

1,016,653,604

1,016,653,604

422,501,010－
422,501,010

422,501,010－
422,501,010

2,953,939
2,531,799

2,893,263
2,953,939

The number of shares of treasury stock includes treasury stock held by the associates of the Company.

(3) Surplus
1) Capital surplus
Capital surplus mainly consists of legal capital surplus.
2) Retained earnings
Retained earnings consist of legal retained earnings and other retained earnings.
The Companies Act of Japan provides that an amount equal to 10% of distribution of surplus for each fiscal year must be appropriated aslegal capital surplus or legal retained earnings until the total aggregate amount of legal capital surplus and legal retained earnings equals
25% of share capital.
Under the Companies Act, the amounts available for distribution are calculated based on the amounts of capital surplus and retained
earnings, exclusive of legal capital surplus and legal retained earnings, all of which are recorded in accordance with the accounting
principles generally accepted in Japan.

(4) Dividends
1) Amounts of dividends paid
Resolution
May 23, 2016
Board of Directors
meetingNov. 2, 2016
Board of Directors
meeting

Resolution
May 25, 2015
Board of Directors
meetingNov. 5, 2015
Board of Directors
meetingType of stock

Source ofdividends

Total amounts ofdividends
JPY
USD

Common stock

Retainedearnings

1,053

9,388

2.50

Common stock

Retainedearnings

1,263

11,2653.00

Type of stock

Source ofdividends

Total amounts ofdividends
JPY

Common stock

Retainedearnings

632

Common stock

Retainedearnings

1,053

Continued
30

Dividends
per share
Yen
U.S.$

Record date

Effective date

0.022

Mar. 31, 2016

Jun. 6, 2016

0.027

Sep. 30, 2016

Dec. 2, 2016

Record date

Effective date

1.50

Mar. 31, 2015

Jun. 4, 2015

2.50

Sep. 30, 2015

Dec. 4, 2015

Dividends
per share
Yen

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20172) Dividends with record date in the current fiscal year, and effective date in the following fiscal year
Resolution

Type of stock

Source ofdividends

Total amounts ofdividends
JPY
USD

May 22, 2017
Board of Directors
meeting

Common stock

Retainedearnings

1,263

Dividends
per share
Yen
U.S.$

11,265

3.00

0.027

Record date

Effective dateMar. 31, 2017

Jun. 5, 2017

19. Revenue
The breakdown of revenue is presented as follows:
JPY
2017
Revenue from the sale of goods
Revenue from rendering of services and others
Total

2016
653,529
22,050675,579

646,004
22,369668,374

USD
2017
5,825,206
196,543
6,021,748

20. Selling, General and Administrative Expenses
The breakdown of selling, general and administrative expenses is presented as follows:
JPY
2017
Depreciation and amortization
Personnel expenses
Outsourcing service charges
Rent expenses
Other
Total

USD
2017

2016
1,822
42,834
6,827
6,320
18,35876,163

1,883
37,782
6,417
5,351
17,143
68,577

16,243381,80360,85956,336
163,635
678,876

21. Gain or Loss on Sale or Disposal of Property, Plant and Equipment and Intangible Assets
The breakdown of gain or loss on sale or disposal of property, plant and equipment and intangible assets is presented as follows:
JPY
2017

USD
2017

2016

Gain on sale of property, plant and equipment
Gain on sale of intangible assets
Total gain on sale of property, plant andequipment and intangible assets
Loss on sale of property, plant and equipment
Loss on sale of intangible assets
Total loss on sale of property, plant andequipment and intangible assets
Loss on disposal of property, plant and equipment
Loss on disposal of intangible assets
Total loss on disposal of property, plant andequipment and intangible assets
Gain (loss) on sale or disposal of property,
plant and equipment and intangible assets, net

543
－

25
14

4,845
－

543

40

4,845

(1)
－

(251)
(0)

(10)
－

(1)

(252)

(10)

(83)
(73)

(76)
(22)

(748)
(657)

(157)

(99)

(1,405)

384

(311)

3,430

22. Impairment Loss
(1) Breakdown of impairment loss by each class of assets
The breakdown of impairment losses by class of assets is presented as follows. Impairment losses for property, plant andequipment and intangible assets are included in “Impairment loss on property, plant and equipment and intangible assets” , andimpairment losses for goodwill are included in “Other expenses” in the consolidated statement of income.
JPY
2017
Property, plant and equipment
Goodwill
Intangible assets
Total

USD
2017

2016
(173)
(143)
(692)
(1,009)Continued
31

(81)
－
(12)
(94)

(1,550)(1,275)(6,174)(8,999)KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(2) Breakdown by reportable segment
The breakdown of impairment losses by reportable segment is presented as follows:
JPY
2017
Electronics & Devices
Foods & Grain
Steel, Materials & Plant
Other/Adjustment and elimination
Total

USD
2017

2016
(721)
(143)
(13)
(132)
(1,009)

(13)
－
(79)
(1)
(94)

(6,429)(1,275)(118)(1,177)(8,999)For the fiscal year ended March 31, 2016, an impairment loss of ¥79 million was recognized as a result of reducing the carrying amount ofproperty, plant and equipment related to several petrol service stations in Japan, as the Company had determined to withdraw from thisbusiness, to the recoverable amount of ¥4 million. The recoverable amount is based on fair value less costs of disposal and the fair value isestimated mainly based on the real estate appraisal. The assets belong to the Steel, Materials & Plant segment.
For the fiscal year ended March 31, 2017, an impairment loss of ¥132 million ($1,177 thousand) was recognized as a result of reducing thecarrying amount of land owned in Japan, which the Company determined to sell, to the recoverable amount of ¥589 million ($5,250
thousand). The recoverable amount is based on fair value less costs of disposal and the fair value is estimated mainly based on the real estateappraisal. The asset belongs to the Other segment.
Regarding the pet-related business of the domestic subsidiary, an impairment loss of ¥143 million ($1,275 thousand) was recognized as aresult of reducing the carrying amount of goodwill to the recoverable amount of ¥1,027 million ($9,154 thousand) because future cash flows
anticipated to be generated was judged to be lower than originally assumed. The recoverable amount is based on the value in use and it wasestimated by discounting future cash flows at a pre-tax rate of 4.61%. The asset belongs to the Food & Grain segment.
Regarding intangible assets, an impairment loss of ¥656 million ($5,854 thousand) was recognized as the enterprise system, which had beenin process of development but was abandoned, was evaluated to have a zero recoverable amount. The recoverable amount is based on thevalue in use. The asset belongs to the Electronic & Devices segment.
While fair values are categorized into three levels depending on inputs to valuation techniques used, all the fair values above are categorized
within Level 3 of the fair value hierarchy with its details described in Note 2. Basis of Preparing Consolidated Financial Statements, (4) Useof estimates and judgments.

23. Exchange Differences
Exchange differences recognized in profit or loss for the fiscal years ended March 31, 2017 and March 31, 2016 were ¥(812) million($(7,239) thousand) and ¥713 million, respectively and are included in“Other expenses” and “Other income” in the consolidated statementof income. In addition, each amount includes gains or losses arising from currency-related derivative transactions that were entered into forthe purpose of hedging the foreign currency risk. Gains and losses arising from translating assets and liabilities denominated in a currency
other than the functional currency or from settling such items are included in profit or loss as they arise.

24. Finance Income and Finance Costs
The breakdown of finance income and finance costs is presented as follows:
JPY
2017
Interest income
Financial assets measured at amortized cost
Financial assets measured at fair value through profit
or loss
Total interest income
Dividend income
Financial assets measured at fair value through profit
or loss
Financial assets measured at fair value through othercomprehensive income
Total dividend income
Total finance income
Interest expenses
Financial liabilities measured at amortized cost
Derivatives
Total interest expenses
Other finance costs (Note)
Other finance costs
Total other finance costs
Total finance costs

USD
2017

2016
399

478

3,563

22

－

196

421

478

3,759

209

147

1,868

906

779

8,080

1,116
1,537

927
1,405

9,948
13,707(2,033)(270)(2,304)(2,167)(240)(2,407)(18,126)(2,412)(20,538)(2,000)(2,000)(4,304)

(323)
(323)
(2,731)(17,832)(17,832)(38,371)(Note) The amounts of other finance costs are those related to financial assets measured at fair value through profit or loss and the details arepresented in Note 30. Financial Instruments: (6)-3)-(ii) Recurring fair value measurements categorized within Level 3 of the fair value
hierarchy.

Continued
32

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201725. Earnings Per Share Attributable to Owners of the Parent(1) Basic earnings per share
Yen
2017

U.S. dollar
2017

2016

Basic earnings per share

19.13

21.29

0.17

Diluted earnings per share is not presented as there are no shares with a dilutive effect.

(2) Bases for calculation of basic earnings per share
JPY
2017

USD
2017

2016

Profit attributable to owners of the Parent
Amount not attributable to common shareholders of
the Parent
Profit used to calculate basic earnings per share

8,049

8,959

71,748

－

－

－

8,049

8,959

71,748

Thousand shares
2017
Weighted average number of common shares

2016
420,821420,803

26. Other Components of Equity and Other Comprehensive Income
Changes in other components of equity are presented as follows:
JPY
2017
Exchange differences on translation of foreign
operations
Balance at the beginning of the year
Changes during the period
Balance at the end of the year
Financial assets measured at fair value through othercomprehensive income
Balance at the beginning of the year
Changes during the period
Reclassification to retained earnings
Balance at the end of the year
Cash flow hedges
Balance at the beginning of the year
Changes during the period
Balance at the end of the year
Remeasurements of defined benefit pension plans
Balance at the beginning of the year
Changes during the period
Reclassification to retained earnings
Balance at the end of the year
Other components of equity
Balance at the beginning of the year
Changes during the period
Reclassification to retained earnings
Balance at the end of the year

USD
2017

2016

2,912
(562)
2,349

5,258
(2,346)
2,912

25,958(5,015)20,943

6,967
2,613
(125)
9,455

8,784
(1,542)
(275)
6,967

62,10423,299(1,118)84,285(1,393)
1,004
(388)

142
(1,535)(1,393)(12,421)
8,955(3,465)

－
(384)
384
－

－
(286)
286
－

－
(3,428)
3,428
－

8,486
2,671
259
11,41614,185(5,711)
11
8,486

75,641
23,811
2,310
101,762

Continued
33

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
The breakdown for the amounts of reclassification adjustments and deferred tax in other comprehensive income is presented
as follows:
JPY
2017
Financial assets measured at fair value through othercomprehensive income
Amount arising during the year
Amount before deferred tax
Deferred tax
Financial assets measured at fair value throughother comprehensive income
Remeasurements of defined benefit pension plans
Amount arising during the year
Amount before deferred tax
Deferred tax
Remeasurements of defined benefit pension plans
Exchange differences on translation of foreign
operations
Amount arising during the year
Reclassification adjustments
Exchange differences on translation of foreign
operations
Cash flow hedges
Amount arising during the year
Reclassification adjustments
Amount before deferred tax
Deferred tax
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using the equity method
Amount arising during the year
Reclassification adjustments
Share of other comprehensive income ofinvestments accounted for using the equity
methodTotal other comprehensive income

USD
2017

2016

3,690
3,690
(1,019)(2,727)(2,727)
1,147

32,89832,898(9,084)

2,671(1,580)23,815

(323)
(323)
39
(284)

(578)
(578)
152
(426)

(2,880)(2,880)349(2,532)(826)(2)(2,911)
17(7,365)
(26)

(829)

(2,894)(7,391)

467
918
1,386
(401)
984

(1,097)(1,058)(2,156)645(1,511)

4,170
8,186
12,356(3,577)
8,779

113
21

(114)
(27)

1,011
191

134

(141)

1,203

2,678

(6,554)23,87327. Cash Flow Information(1) Cash and cash equivalents
The breakdown of cash and cash equivalents and its reconciliation to the amounts presented in the consolidated statement of financial
position are as follows:
JPY
2017
Cash and bank deposits except for time deposits withoriginal term of more than three months
Short-term investments with original maturity of threemonths or less
Cash and cash equivalentsin the consolidated statement of financial position
Cash and cash equivalentsin the consolidated statement of cash flows

USD
2017

2016
77,23087,466688,387

336

－

3,000

77,56687,466

691,387

77,56687,466

691,387

Continued
34

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
(2) Net payment for acquisition of subsidiaries
The breakdown of the main assets and liabilities of newly acquired subsidiaries at the time control thereof was acquired, and thereconciliation between consideration paid and net payment for the acquisition are presented as follows:

JPY
2017
Breakdown of assets at the acquisition dateCurrent assets (including cash and cash
equivalents)
Non-current assets
Breakdown of liabilities at the acquisition dateCurrent liabilities
Non-current liabilities

USD
2017

2016
19,005

5,276

169,403

17,066

1,285

152,123(17,746)(925)(5,572)(696)(158,179)(8,252)(17,400)

(105)

USD
2017
(155,094)

4,613

1,283

41,122(12,786)

1,178(113,972)

JPY
2017
Consideration paid
Cash and cash equivalents included in the assets atthe time control thereof was acquired
Net proceeds from (payment for) acquisition ofsubsidiaries

2016(3) Net proceeds from sale of subsidiaries
The breakdown of the main assets and liabilities of companies that are no longer the subsidiaries of the Company as a result of the sale ofshares at the time control thereof was lost, and the relationship between consideration received and net proceeds from the sale are presented
as follows:
JPY
2017
Breakdown of assets upon loss of control
Current assets (including cash and cash
equivalents)
Non-current assets
Breakdown of liabilities upon loss of control
Current liabilities
Non-current liabilities

USD
2017

2016
143

1,833

1,276

61

493

550

(85)
(9)

(2,941)
－

(764)
(87)

JPY
2017
Consideration received
Cash and cash equivalents included in the assets atthe time control thereof was lost
Net proceeds from (payment for) sale of subsidiaries

USD
2017

2016
66

282

588

(72)

(447)

(651)

(6)

(165)

(62)

(4) Significant non-cash transactions
There were no significant non-cash transactions for the fiscal years ended March 31, 2017 and March 31, 2016.

Continued
35

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201728. Employee Benefits(1) Post-employment benefits
1) Outline of retirement benefit plans adopted by the Consolidated GroupThe Company has a defined benefit pension plan and lump-sum retirement benefit plan covering substantially all employees other thandirectors and executive officers. The benefit amounts for the defined benefit pension plan are determined based on the period of
employees’ enrollment in the plan, contribution granted to employees and other factors. The Company has a responsibility to manage
pension assets faithfully and has an obligation to make contributions for the employees enrolled in the plan in compliance with applicablelaws and regulations.
The pension plan that the Company maintains is a contract-type defined benefit pension plan.
Matters such as asset management performance, status of the plan and accounting treatment are reported to the Management Committeeby the Finance Department and the Personnel & General Affairs Department, which are in charge of operation of the pension plan. These
departments hold a meeting on a timely manner to discuss the matters such as a revision to the plan and a change in the asset investment
policy.
Most of the subsidiaries have unfunded retirement benefit plans and/or funded pension plans. Employees, other than directors, are entitled
to, under most circumstances, upon mandatory retirement at normal retirement age or earlier termination of employment, a lump-sum
retirement benefit based on compensation at the time of retirement, years of service and other factors. Certain subsidiaries have adopted
the defined contribution retirement benefit plan.
2) Defined benefit plan(i) Net defined benefit liability (asset)
Reconciliation of the beginning and ending balances of net defined benefit liability (asset) and the components for the years ended
March 31, 2017 and March 31, 2016 are presented as follows:(JPY)

As of March 31, 2015
Current service cost
Net interest
Remeasurements
Foreign exchange translation differences
Employer contributions to the plan
Benefits paid
Effect of business combinations anddisposals
Other
As of March 31, 2016
Current service cost
Net interest
Remeasurements
Foreign currency translation difference
Employer contributions to the plan
Benefits paid
Effect of business combinations anddisposals
Other
As of March 31, 2017

Present valueof the defined
benefit obligation
18,823
1,260
103
639
(60)
－
(1,577)

Fair value of plan
assets

Effect of the asset
ceiling

Net defined benefit
liability (asset)(13,422)
－
(77)
(60)
14
(929)
1,160

－

5,400
1,260
26
578
(46)
(929)
(416)

－
－
－
－
－
－
－

－

－

(106)
19,082
1,350
54
123
(8)
－
(1,625)

4(13,309)
－
(40)
(61)
0
(877)
976

706

－

－
－
261
－
－
－
－

(56)
19,625

6(13,305)

－
261

－
－

－
(102)
5,772
1,350
14
323
(7)
(877)
(649)
706
(50)
6,581
(USD)

As of March 31, 2016
Current service cost
Net interest
Remeasurements
Foreign currency translation difference
Employer contributions to the plan
Benefits paid
Effect of business combinations anddisposals
Other
As of March 31, 2017

Present valueof the defined
benefit obligation
170,087
12,040
487
1,100
(79)
－
(14,490)

Fair value of plan
assets

Effect of the asset
ceiling

Net defined benefit
liability (asset)(118,637)
－
(360)
(550)
7
(7,819)
8,701

－
－
－
2,330
－
－
－

51,45012,040
127
2,880
(71)
(7,819)(5,789)

6,297

－

－

6,297

(507)
174,935

60(118,598)

－
2,330

(447)
58,667

Continued
36

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
Remeasurements of the defined benefit obligation for the fiscal years ended March 31, 2017 and March 31, 2016 are the differences
arising primarily from changes in financial assumptions.
(ii) Reconciliation of ending balances of defined benefit obligation/plan assets and net defined benefit liability/asset presented on the
consolidated statements of financial position
JPY
2017
Defined benefit obligations of funded plan
Plan assets
Net defined benefit liability of funded plan
Defined benefit obligations of unfunded plan
Net liability or asset presented on the consolidated
statements of financial position (Before the effect of theasset ceiling)

USD
2017

2016
15,379(13,305)
2,073
4,246

15,561(13,309)
2,251
3,520

137,084(118,598)
18,48537,851

6,320

5,772

56,337The measurement date used to determine the main benefit obligations is March 31 of each year.
The Company’s funding policy is based on a number of factors including the tax deductibility of contributions, funded status,
actuarial calculations and other considerations. Contributions are intended to provide not only for benefits attributable to service todate, but also for those expected to be earned in the future. In addition, the Company may contribute cash to an employee retirement
benefit trust for any funding deficits in benefit obligations at the fiscal year end.
The Company’s investment policy is designed to increase the value of plan assets within acceptable risk levels to ensure payments ofpension benefits to eligible participants, including future participants. Taking into account the return and risk on plan assets thereon,
the Consolidated Group formulates a strategic asset mix which aims at an optimal portfolio on a long-term basis and supervise asset
management by selecting investment management companies and monitoring asset allocations. The strategic asset mix is subject toreview in response to changes in expected market conditions or funded status. The strategic asset mix is not based on limitations but
guidelines, and therefore, the actual allocation may temporarily exceed or fall below the guidelines. The Company’s target allocation
is 10% equity securities, 40% debt securities, 40% life insurance company general accounts and 10% others.
The Company holds a meeting regularly with the asset management institutions and discusses important issues regarding pension
assets investment.
(iii) Plan assets
The composition of the plan assets as of March 31, 2017.

Equity securities
Debt securities
Life insurance company general accounts
Other
Total

Plan assets with a quoted market price inan active market
JPY
USD
1,253
11,177
4,484
39,971
－
－
180
1,608
5,918
52,756

Plan assets without a quoted market price inan active market
JPY
USD
0
6
482
4,304
6,168
54,981
734
6,551
7,386
65,843The composition of the plan assets as of March 31, 2016.

Equity securities
Debt securities
Life insurance company general accounts
Other
Total

Plan assets with a quoted market price inan active market
JPY
1,164
4,798
－
161
6,124

Plan assets without a quoted market price inan active market
JPY
1
403
4,464
2,316
7,185

(iv) Significant actuarial assumptions
2017
Discount rate

2016
0.5%

0.3%

The assumptions used for the actuarial calculation include the expected rate of salary increase, the mortality rate and the retirement
rate other than the above.

Continued
37

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(v) Sensitivity analysis of defined benefit obligations
JPY
2017
Increase in the defined benefit obligation with a
50-basis-point decrease in the discount rate
Decrease in the defined benefit obligation with a
50-basis-point increase in the discount rate

USD
2017

2016
845

135

7,536

(994)

(254)

(8,869)This analysis is based on the premise that the actuarial assumptions other than the discount rate do not fluctuate and that only thediscount rate fluctuates. This method of analysis is based on assumptions, and it is possible that the actual calculation could be
influenced by fluctuations in other variables. Even if the discount rate falls below 0%, the calculation is performed assuming thelower limit of the discount rate is 0%.
(vi) Information on maturity profile of the defined benefit obligation
The weighted average duration of the defined benefit obligation for both of the fiscal years ended March 31, 2017 and March 31,
2016 was 10.9 years.
(vii) Expected contribution to the plan for the year ending March 31, 2018
The amount of contribution to be made by the Consolidated Group to plan assets for the year ending March 31, 2018 is estimated tobe ¥907 million ($8,087 thousand).
3) Defined contribution plan
Expenses recognized for the defined contribution plan for the years ended March 31, 2017 and March 31, 2016 were ¥232 million($2,070 thousand) and ¥177 million, respectively.

(2) Employee benefit expenses
Employee benefit expenses recognized for the years ended March 31, 2017 and March 31, 2016 were ¥1,683 million ($15,008 thousand) and¥1,559 million, respectively. Employee benefit expenses are included in “Cost of sales” and “Selling, general and administration expenses”
in the consolidated statement of income.

Continued
38

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201729. Current and Deferred Income Tax(1) Deferred taxes
1) Breakdown of deferred tax assets and deferred tax liabilities
The breakdown of main deferred tax assets and deferred tax liabilities by component is as follows:
JPY
2017
Deferred tax assets
Retirement benefits liabilities
Loss allowance
Inventories
Impairment loss
Other investments
Golf club memberships
Tax losses carried forward
Cash flow hedges
Goodwill
Other
Total deferred tax assets
Offset against deferred tax liabilities
Total deferred tax assets, net
Deferred tax liabilities
Retained earnings in subsidiaries
Financial assets measured at fair value through othercomprehensive income
Intangible assets
Other
Total deferred tax liabilities
Offset against deferred tax assets
Total deferred tax liabilities, net
Net deferred tax assets

USD
2017

2016

1,872
588
477
500
819
195
3,904
173
2,658
4,359
15,549(10,530)
5,018

1,302
681
497
677
857
157
5,628
613
－
3,547
13,963(4,879)
9,084

16,686
5,244
4,259
4,457
7,301
1,746
34,802
1,545
23,69438,862
138,596(93,860)
44,737

(74)

(267)

(667)

(4,096)(3,085)(36,510)(5,292)(1,491)(10,954)
10,530(424)
4,594(1,095)(729)(5,177)
4,879
(297)
8,786

(47,177)(13,291)(97,645)
93,860(3,786)
40,951

2) Details of changes in deferred tax assets and deferred tax liabilities
Details of changes in deferred tax assets and deferred tax liabilities are presented as follows:
JPY
2017
Beginning balance of net deferred tax assets
Deferred tax expense
Income tax on other comprehensive income
Acquisition through business combinations
Other
Ending balance of net deferred tax assets

2016
8,786
(2,589)(1,381)
(17)
(203)
4,594

10,243(3,316)
1,944
－
(85)
8,786

USD
2017
78,317(23,081)(12,312)(160)(1,813)
40,951

3) Deductible temporary differences and unused tax losses carried forward for which deferred tax assets were not recognized
The breakdown of deductible temporary differences and unused tax losses carried forward (by expiry date), for which
deferred tax assets were not recognized in the consolidated statement of financial position are presented as follows:
JPY
19,466

17,639USD
2017173,515170
28,172
13,350251
41,94421
26,606
11,609186
38,424

1,515
251,117
118,998
2,241
373,872

2017
Deductible temporary differences
Tax losses carried forward
Within one year to expiry
Between one and five years to expiry
Between five and ten years to expiry
Over ten years to expiry
Total tax losses carried forward

20164) Temporary differences associated with investments in subsidiaries for which deferred tax liabilities were not recognized
The total amounts of temporary differences associated with investments in subsidiaries for which deferred tax liabilities were notrecognized as of March 31, 2017 and March 31, 2016 are ¥20,136 million ($179,482 thousand) and ¥16,549 million, respectively.
Because the Consolidated Group is able to control the timing of the reversal of such temporary differences, and it is probable that such
temporary differences will not be reversed within the foreseeable future, it did not recognize deferred tax liabilities with respect to such
temporary differences.

Continued
39

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(2) Income taxes
1) Breakdown of income taxes
The breakdown of income taxes is presented as follows:
JPY
2017
Current tax expense (Note 1)
Deferred tax expense (Note 2)
Origination and reversal of temporary differences
Reassessment of recoverability of deferred tax
assetsChanges in tax rate
Total deferred tax expense
Total income taxes

USD
2017

2016
(4,999)(3,997)(44,563)(1,754)(1,721)(15,641)(834)(1,036)(7,440)－(2,589)(7,589)(558)(3,316)(7,313)－(23,081)(67,645)(Notes) 1. The amounts of the benefits arising from previously unrecognized tax losses or temporary differences of a prior period that wereused to reduce current tax expenses for the years ended March 31, 2017 and March 31, 2016 were ¥22 million ($196 thousand) and¥487 million, respectively, and these benefits were included in the current tax expenses.
2. Major causes for deferred tax expense by type are tax losses carried forward of ¥(1,724) million ($(15,369) thousand) and goodwillof ¥(797) million ($(7,107) thousand) for the fiscal year ended March 31, 2017, and inventories of ¥(1,209) million and tax losses
carried forward of ¥(1,156) million for the fiscal year ended March 31, 2016.
2) Reconciliation of statutory effective income tax rate in Japan
Reconciliations between the statutory effective tax rate in Japan and the average effective tax rate of the Consolidated Group were as
follows:
2017
Statutory effective tax rate
(Adjustments)
Permanent differences—additions
such as entertainment expenses
Effect of reassessment of recoverability ofdeferred tax assets
Effect of tax rate differences
Share of profit (loss) of investments accounted forusing the equity method
Tax reform
Other
Average effective tax rate

2016
30.8%

33.1%

2.9%

0.7%

4.7%

5.7%

2.1%

(0.5)%

3.3%(1.1)%－(1.4)%
42.5%

3.1%(0.6)%
40.4%

The effective statutory effective tax rate for the fiscal year ended March 31, 2017 is calculated to be 30.8% based on the Corporation Tax,
Inhabitant Tax and Business Tax in Japan.
On November 18, 2016, “The act for partial amendment of the act and others for partial amendment of the consumption tax act and others
for the drastic reform of the taxation system for ensuring stable financial resources for social security” (Act No.85 of 2016) and “The act
for partial amendment of the act and others for partial amendment of the local taxation act and local allocation tax act and others for the
drastic reform of the taxation system for ensuring stable financial resources for social security” (Act No.86 of 2016) were approved in theDiet. Under these acts, the consumption tax hike to 10% scheduled on April 1, 2017 was postponed until October 1, 2019.
As a result of this change, the abolition of special local corporate tax, the restoration of corporation enterprise tax, the tax rate
amendments of local corporation tax and corporate residential tax were also postponed from the fiscal year beginning on or after April 1,2017 to the fiscal year beginning on or after October 1, 2019.
Although the statutory effective tax rate being applied in the deferred tax calculation remains unchanged, there is a reclassification
between national and local tax rates. The effects on the consolidated financial statements are immaterial.

Continued
40

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201730. Financial Instruments(1) Classification of financial instruments
The breakdown of financial instruments for each classification is presented as follows:
JPY
2017
Financial assets
Cash and cash equivalents
Financial assets measured at amortized cost
Trade and other receivables
Other investments
Other financial assets
Total financial assets measured at amortized cost
Financial assets measured at fair value through profit or loss
Other investments
Other financial assets
Total financial assets measured at fair value through profit or
loss
Financial assets measured at fair value through othercomprehensive income
Other investments
Total financial assets measured at fair value through othercomprehensive income
Total financial assets
Financial liabilities
Financial liabilities measured at amortized cost
Trade and other payables
Bonds and borrowings
Other financial liabilities
Total financial liabilities measured at amortized cost
Financial liabilities measured at fair value through profit or loss
Other financial liabilities
Total financial liabilities measured at fair value through profit orloss
Total financial liabilities

USD
2017

2016
77,56687,466

691,387

192,363994
6,635
199,993

164,001
1,000
7,657
172,658

1,714,621
8,864
59,147
1,782,631

5,054
2,365

5,637
379

45,05321,088

7,420

6,016

66,141

28,06324,897250,140

28,06324,897250,140

313,043

291,0392,790,299

165,011
133,8449,477
308,334

142,143
136,867
9,979
288,990

1,470,822
1,193,021
84,4782,748,320

1,896

3,829

16,904

1,896

3,829

16,904

310,230

292,819

2,765,224(2) Basic policies for risk management of financial instruments
The Consolidated Group is an integrated trading company engaged in a wide range of business activities on a global basis. Its headquarters
includes business sections that handle merchandising, trading, product manufacturing, services, project planning and management,
investments and financing activities, both domestically and internationally. Such businesses are inherently exposed to various risks. The
Consolidated Group defines and classifies risks per risk item and manages each of them in accordance with its nature.

(3) Credit risk management
1)

Credit risks of financial assets owned by the Company (risk exposure and the occurrence of the relevant risk)
The Consolidated Group extends credit to a large number of customers in Japan and abroad in diverse business transactions, resulting ina number of financial assets such as trade receivables, loans and other financial assets. These financial assets provide credit
accommodation to the various customers; therefore, the Consolidated Group is mainly exposed to the credit risks related to thosecustomers.
Moreover, other investments include debt instruments that are the investments in the customers, which expose the Consolidated Groupto the credit risk arising from deterioration in the financial position of issuers.
Each department manages credit exposure to each customer by assigning credit ratings on a customer-by-customer basis and setting
credit exposure limits within the framework of the Consolidated Group’s credit risk control.

2)

Responses to the risk owned by the Company (purpose, policy and procedure of the risk management and method used to measuresuch risks)
The Consolidated Group manages its credit risk to the customers by defining risk management methods and management systems for
specific risks in accordance with the regulations on risk management. Based on such regulations, the Consolidated Group mitigatescredit risk through periodical monitoring of the customer’s credit status and undertaking the maturity control and account balance
control, while detecting promptly any doubtful accounts caused by deterioration in the financial conditions of customers and otherfactors. Expected credit losses are recognized and measured through transactions and financial information related to customers
available in the course of such credit risk management, while taking macroeconomic conditions such as the number of bankruptcies into
consideration.
With regard to loans, the Consolidated Group determines there has been a significant increase in credit risk of the financial assets sinceinitial recognition in cases where the cash collection of the financial assets was delayed (as well as the case of request for a grace period)
after the trade date. However, even when a late payment or request for grace period occurs, the Consolidated Group does not determinethat there has been a significant increase in credit risk if such late payment or request for grace period would be attributable to temporary

Continued
41

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
cash shortage, the risk of default would be low and objective data such as external credit ratings would reveal their ability to fulfill theobligation of contractual cash flow in the near future.
However, the Consolidated Group determines that the credit of the financial assets are impaired, when late payment or request for grace
period do not arise from temporary cash shortage but significant financial difficulty of the debtor and the recoverability of the modified
financial assets is significantly doubtful.
The Consolidated Group determines there has been a significant increase in the credit risk of debt instruments since initial recognition
when an “investment grade” at the initial recognition deteriorates to the level below investment grade. For such purpose, rating
information provided by major rating agencies is used.
When guaranteeing the debts of its customers, the Consolidated Group establishes the guarantee limit amounts based upon the financial
position and business condition of the customers. The guarantee limit amounts are periodically reviewed and maintained at appropriate
levels.
When entering into derivative transactions, the Consolidated Group only deals with major financial institutions with high credit ratings
assigned by independent rating agencies so as to minimize the credit risks. In addition, the Consolidated Group periodically reviews
credit limits in accordance with the internal regulations.
The Consolidated Group considers trade receivables, loans receivable, and debt instruments as default when all or part of those financial
instruments are not recovered or the recoverability of those financial instruments is determined to be extremely difficult.
(i) Measurement of expected credit losses on trade receivables
As trade receivables do not contain a significant financing component, the Consolidated Group measures loss allowance at an
amount equal to the lifetime expected credit losses until the trade receivables are recovered. As performing trade receivables
comprise a number of customers, the Consolidated Group measures expected credit loss collectively by grouping those receivables
and considering historical credit loss experience. When those receivables are affected by a material economic change, the provision
rate calculated based upon the historical credit loss experience is adjusted to reflect current and future economic prospect.
Even when a late payment or request for grace period has occurred, the Consolidated Group does not regard them as past due
receivables if such late payment or request for grace period would be attributable to temporary cash shortage as the risk of default
would be low, and the debtors are evaluated to have a strong ability to fulfill the obligation of contractual cash flow in the near
future.
(ii) Measurement of expected credit losses on other receivables
When credit risk related to loans has not increased significantly since the initial recognition at the end of the reporting period, theConsolidated Group calculates the amount of loss allowance of the financial instruments by estimating the 12-months expectedcredit losses collectively based upon historical credit loss experience. When those receivables are affected by a material economicchange, the provision rate calculated based upon the historical credit loss experience is adjusted to reflect current and future
economic prospect.
However, when there has been a significant increase in credit risk since initial recognition as of the end of the fiscal year, theConsolidated Group estimates the lifetime credit losses on the financial instruments individually and measures the amount of loss
allowance based upon historical credit loss experience and future recoverable amount.
(iii) Measurement of the expected credit losses on the other investments (debt securities)
When credit risk related to debt securities has not increased significantly since initial recognition at the end of the reporting period,
the Consolidated Group calculates the amount of loss allowance of the financial instruments by estimating the 12-months expectedcredit losses. However, when there has been a significant increase in credit risk since initial recognition as of the end of the fiscal
year, the Consolidated Group estimates the lifetime credit losses on the financial instruments and measures the amount of loss
allowance of the financial instruments. When estimating such expected credit losses, the Consolidated Group uses the default rate
published by major rating agencies.
The Consolidated Group directly writes off the gross carrying amounts of the credit-impaired financial assets when all or part of thefinancial assets are evaluated to be uncollectible and determined that it is appropriate to be written off as a result of credit check.

Continued
42

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20173) Quantitative and qualitative information on the amounts arising from expected credit losses(i) Trade and other receivables
Loss allowance
As of April 1, 2015
1. Reclassification to credit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
5. Increase (decrease) resulting from changes in the provision
rate based on historical credit loss experience
As of March 31, 2016
1. Reclassification to credit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
5. Increase (decrease) resulting from changes in the provision
rate based on historical credit loss experience
As of March 31, 2017

Gross carrying amount
As of April 1, 2015
1. Financial assets reclassified to credit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
As of March 31, 2016
1. Financial assets reclassified to credit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
As of March 31, 2017

Loss allowance
As of March 31, 2016
1. Reclassification to credit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
5. Increase (decrease) resulting from changes in the provision
rate based on historical credit loss experience
As of March 31, 2017

Gross carrying amount
As of March 31, 2016
1. Financial assets reclassified to credit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
As of March 31, 2017

(JPY)
Lifetime expected credit losses
Collective assessment
Credit-impaired financial assets
19
2,651
(0)
79
(1)
(97)
(249)
－
(7)
－
(10)

－

7
(0)
0
－
－

2,375
63
(138)
(166)
1

(4)

－

3

2,135

(JPY)
Lifetime expected credit losses
Collective assessment
Credit-impaired financial assets
186,564
2,981
(159)
159
(22,758)
(145)
(249)
－
(7)
－
163,646
2,737
(63)
63
28,502
(219)
(166)
－
1
－
192,085
2,416(USD)
Lifetime expected credit losses
Collective assessment
Credit-impaired financial assets
67
21,178(0)567
5(1,238)(1,483)
－
10
－
(39)

－

33

19,033(USD)
Lifetime expected credit losses
Collective assessment
Credit-impaired financial assets
1,458,657
24,402(567)
567
254,057(1,956)(1,483)－10－
1,712,148
21,539Continued
43

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(ii) Other investments (debt instrument securities)

Loss allowance

12 months

As of April 1, 2015
1. Changes in financial instruments recognized at the
beginning of the period(a) Reclassified to lifetime expected credit losses(b) Reclassified to credit-impaired financial assets(c) Individual financial assets reclassified fromcredit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Increase (decrease) due to changes in default rate
As of March 31, 2016
1. Changes in financial instruments recognized at the
beginning of the period(a) Reclassified to lifetime expected credit losses(b) Reclassified to credit-impaired financial assets(c) Individual financial assets reclassified fromcredit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Increase (decrease) due to changes in default rate
As of March 31, 2017

0

(JPY)
Expected credit losses
Lifetime
Credit-impaired financial
Individual assessment
assets
－
－

－

－

－

－
－

－
－

－
－

－

－

－

－
－
0
0

－
－
－
－

－
－
－
－

－

－

－

－
－

－
－

－
－

－

－

－

－
－
5
5

－
－
－
－

－
－
－
－
(JPY)

Expected credit losses
Gross carrying amount

12 months

As of April 1, 2015
1. Changes in financial instruments recognized at the
beginning of the period(a) Reclassified to lifetime expected credit losses(b) Reclassified to credit-impaired financial assets(c) Individual financial assets reclassified fromcredit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Other changes
As of March 31, 2016
1. Changes in financial instruments recognized at the
beginning of the period(a) Reclassified to lifetime expected credit losses(b) Reclassified to credit-impaired financial assets(c) Individual financial assets reclassified fromcredit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Other changes
As of March 31, 2017

1,000

Continued
44

Lifetime
Credit-impaired financial
Individual assessment
assets
－
－

－

－

－

－
－

－
－

－
－

－

－

－

－
－
－
1,000

－
－
－
－

－
－
－
－

－

－

－

－
－

－
－

－
－

－

－

－

－
－
－
1,000

－
－
－
－

－
－
－
－

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017

Loss allowance

12 months

As of March 31, 2016
1. Changes in financial instruments recognized at the
beginning of the period(a) Reclassified to lifetime expected credit losses(b) Reclassified to credit-impaired financial assets(c) Individual financial assets reclassified fromcredit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Increase (decrease) due to changes in default rate
As of March 31, 2017

0

(USD)
Expected credit losses
Lifetime
Credit-impaired financial
Individual assessment
assets
－
－

－

－

－

－
－

－
－

－
－

－

－

－

－
－
50
50

－
－
－
－

－
－
－
－
(USD)

Expected credit losses
Gross carrying amount

12 months

As of March 31, 2016
1. Changes in financial instruments recognized at the
beginning of the period(a) Reclassified to lifetime expected credit losses(b) Reclassified to credit-impaired financial assets(c) Individual financial assets reclassified fromcredit-impaired financial assets
2. Incurrence or collection
3. Direct write-off
4. Other changes
As of March 31, 2017

8,913

Lifetime
Credit-impaired financial
Individual assessment
assets
－
－

－

－

－

－
－

－
－

－
－

－

－

－

－
－
－
8,913

－
－
－
－

－
－
－
－

(iii) There is no contractual, uncollected balance for financial assets written off during the fiscal year ended March 31, 2017, for whichcollecting efforts are still being made.
4) Credit risk exposure(i) Trade and other receivables
As of March 31, 2017

Performing receivables
Past due receivables
Total

Balance of receivables (gross)
JPY
USD
192,085
1,712,148
2,416
21,539194,502
1,733,687

Provision rate based on historicalcredit loss experience
0.00%
88.37%－

Lifetime expected credit losses
JPY
USD
3
33
2,135
19,033
2,139
19,066

Past due receivables include loans receivable of ¥1,876 million ($16,728 thousand), for which a loss allowance of ¥1,595 million($14,221 thousand) has been already recognized.
As of March 31, 2016

Performing receivables
Past due receivables
Total

Balance of receivables (gross)
JPY
163,646
2,737
166,384

Provision rate based on historicalcredit loss experience
0.00%
86.79%－

Lifetime expected credit losses
JPY
7
2,375
2,383

Past due receivables include loans receivable of ¥1,969 million, for which a loss allowance of ¥1,688 million has been alreadyrecognized.

Continued
45

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(ii) Other investments (Debt instrument securities)
As of Mach 31, 2017
Gross carrying amount
Debt instrument securities
External rating

Lifetime

12 months

JPY

USD
－
－
－
－
－

AAA-AAA
BBB-BB
B
Total

JPY

USD

－
－
－
－
－

－
－
1,000
－
1,000

－
－
8,913
－
8,913

As of March 31, 2016
Gross carrying amount
Debt instrument securities
External rating

Lifetime
JPY

12 months
JPY
－
－
－
－
－

AAA-AAA
BBB-BB
B
Total

－
－
1,000
－
1,000

5) Maximum exposure to credit risks
The Consolidated Group’s maximum exposure to credit risks is as follows:
The Consolidated Group’s maximum credit risk exposure (gross) represents the amount of the maximum exposure with respect to credit
risks without taking into account any collateral held or other credit enhancement. The Consolidated Group’s maximum credit risk
exposure (net) represents the amount of the maximum exposure with respect to credit risks reflecting the mitigation effect of thecollateral held or other credit enhancement.
As of March 31, 2017
Gross
carrying amount
Cash andcash equivalents
Financial assets
measured
at amortized cost
Trade andother receivables
Other financial
assetsOther investments
Total

Total collaterals
Maximum
pledged and credit
credit risk exposure (gross)enhancements
JPY
USD
JPY
USD

Loss
allowance
JPY

USD

Maximum
credit risk
exposure (net)
JPY
USD

JPY

USD

77,566

691,387－－

77,566

691,387－－

77,566

691,387

194,502

1,733,687(2,139)(19,066)

192,363

1,714,621(141)(1,265)

192,221

1,713,356

6,635

59,147

－

－

6,635

59,147

－

－

6,635

59,1471,000
279,704

8,913
2,493,134(5)(2,144)(50)(19,116)

994
277,560

8,864
2,474,018

－
(141)

－
(1,265)994
277,418

8,864
2,472,753

The amount of loss allowance for credit-impaired financial assets is reduced by ¥141 million ($1,265 thousand) through collateralpledged and credit enhancements.
As of March 31, 2016

Cash and cash equivalents

Grosscarrying amountLossallowance

JPY

JPY

Maximum
credit risk exposure(gross)Total collaterals
pledged and credit
enhancements

Maximum
credit risk
exposure (net)

JPY

JPY

JPY

87,466－87,466－87,466

Financial assets measured atamortized cost
Trade and other receivables

166,384(2,383)164,001(290)

163,710

Other financial assets

7,657

－

7,657

－

7,657

Other investments

1,000

(0)

1,000

－

1,000

Total

262,508(2,383)

260,124(290)

259,834

The amount of loss allowance for credit-impaired financial assets is reduced by ¥290 million through collateral pledged and credit
enhancements.

Continued
46

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(4) Liquidity risk management
The Consolidated Group raises funds through borrowings from financial institutions or issuance of bonds. Accordingly, in the event of a
disruption to the financial system or financial/capital markets, or a major downgrade of the Consolidated Group’s credit rating by a rating
agency, the Consolidated Group’s fundraising becomes constrained and consequently there is a possibility that the Consolidated Group will
not be able to carry out the payment on the date of payment.
The Consolidated Group has sufficient levels of cash and cash equivalents and maintains a long-term (unused) commitment line agreementwith a major financial institution in the amount of ¥10.0 billion ($89,135 thousand) to ensure liquidity and stability of funds. The
Consolidated Group makes efforts to maintain good relationships with each financial institution.
1) Non-derivative financial liabilities
The breakdown of non-derivative financial liabilities by due date is presented as follows:
As of March 31, 2017

Trade and other payables
Bonds
Borrowings

Within one year

Between one andfive years

JPY

USD

JPY

165,0111,470,822

Over
five years

USD

－

JPY
－

Total

USD
－

－

JPY

USD

165,0111,470,822

52

463

10,112

90,142－－

10,16490,60565,697585,589

55,088491,030

6,052

53,950126,838

1,130,569

Lease obligations

436

3,891

939

8,370

62

554

1,437

12,816

Deposits received

2,707

24,134

－

－

2,916

25,9995,624

50,133

Guarantee deposits received

984

8,779

－

－

1,464

13,052

2,449

21,831

Other

118

1,057

－

－

－

－

118

1,057

235,0082,094,736

66,140589,542

10,49593,555

311,645

2,777,832

Total

The Consolidated Group has guarantee obligations of ¥1,881 million ($16,773 thousand)and ¥1,477 million as of March 31,2017 and March 31, 2016 respectively.
As of March 31, 2016

Trade and other payables
Bonds
Borrowings

Within one year

Between one andfive years

Overfive years

Total

JPY

JPY

JPY

JPY

142,143－－

142,143

52

10,164－

10,21663,08652,942

13,651

129,680

Lease obligations

486

1,108

19

1,613

Deposits received

3,028

－

3,050

6,079

960

19

1,377

2,357

Guarantee deposits received
Other
Total

82

－

－

82

209,839

64,23518,098292,173

Continued
47

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20172) Derivative liabilities
The breakdown of derivative liabilities by due date is presented as follows:
As of March 31, 2017
Between one andfive years
JPY
USD

Within one year
Currency-related derivatives
Cash inflows
Cash outflows
Sub totalInterest rate-related derivatives
Commodity-related derivatives
Total

JPY

USD

33,361
34,098
737
268
317
1,323

297,363
303,937
6,574
2,391
2,830
11,795

64
67
3
593
－
596

Over
five years
JPY
USD
－
－
－
15
－
15

571
598
27
5,289
－
5,316

Total

－
－
－
135
－
135

JPY

USD

33,42534,165
740
876
317
1,934

297,934
304,534
6,600
7,815
2,830
17,246

As of March 31, 2016
Within one year
JPY
Currency-related derivatives
Cash inflows
Cash outflows
Sub totalInterest rate-related derivatives
Commodity-related derivatives
Total

Between one andfive years
JPY

45,61748,013
2,396
264
77
2,738

Over
five years
JPY

2,378
2,528
149
765
0
915

Total
JPY
－
－
－
90
－
90

47,99650,542
2,546
1,120
77
3,744

(5) Market risk management
Since the Consolidated Group operates a broad array of businesses around the world, it is directly and indirectly affected by politicaldevelopments and economic conditions in countries where it has a presence, including changes in supply and demand situations. Operationsof the Consolidated Group are exposed to risks stemming from fluctuations in foreign exchange rate, interest rate, commodity price and shareprice.
In many cases, the foreign currency risk, interest rate risk and risk of price fluctuations associated with goods traded incidental to business
transactions are transferred to trade partners, etc. in the form of transaction terms. In addition, the Consolidated Group has established asystem under which a limit (position limit) and a loss limit are set for foreign exchange, funds (interest rates), products and their derivatives,
taking into account the scale of the risk and the income of each internal unit and company, so that it can quickly reduce its position when thepredetermined limit is exceeded.
Also, the price fluctuation risk of these positions is mitigated by using derivatives as a hedge.
1) Foreign currency risk(i) Nature of foreign currency risk and its management policy
The Consolidated Group is engaged in foreign currency transactions in various currencies and terms incidental to its export andimport trading. The Consolidated Group not only transfers the risk of currency fluctuations to customers in accordance withtransaction terms but also participates in derivatives transactions such as forward contracts to reduce the risk.
The Company also has local subsidiaries and business corporations overseas. Account balances at these companies are converted into
yen at the exchange rates prevailing at the end of the reporting period, for the purposes of preparing consolidated financial statements.
As a result, net assets may change through exchange difference of foreign operations associated with exchange rate fluctuations.
In principle, the Company and certain subsidiaries enter into forward exchange contracts to hedge against the exchange rate currency
fluctuation risk of foreign currency-denominated receivables and payables that are controlled by currency and by contract month. The
Company and certain subsidiaries also enter into forward exchange contracts to hedge against foreign currency-denominatedreceivables and payables that are highly probable to arise from export/import-related forecast transactions.
(ii) Sensitivity analysis of foreign currency risk
In regards to financial instruments held by the Consolidated Group as of the end of the consolidated year, the following chart shows
the amounts affecting profit before tax and other comprehensive income (before tax effect adjustments), as reported in the
consolidated financial statements, that would result from 1% appreciation of Japanese Yen against U.S. dollars.
Such analysis is based on the assumption that other factors are held constant.

Continued
48

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
In addition, such analysis does not include the affected amounts based on translations (into Japanese yen) of financial
instruments denominated in functional currency, income and expenses denominated in foreign currency and assets and liabilities
of foreign operations.
JPY
2017
Profit before tax
U.S. dollar
Other comprehensive income
U.S. dollar

USD
2017

2016
(26)

1

(237)

(230)

174

(2,052)

2) Interest rate risk(i) Nature of interest rate risk and its management policy
The Consolidated Group raises most funds needed for operating and financing activities in the form of borrowings from financial
institutions at variable interest rates, with the exception of certain loans. Since these borrowings and fund management are exposed to
an interest rate risk, interest expenses for the Consolidated Group may increase with a rise in interest rates.
The Company and certain consolidated subsidiaries enter into interest rate swap contracts to avoid the interest rate fluctuation risk
stemming from the borrowings.
(ii) Sensitivity analysis of interest rate risk
In regards to financial instruments held by the Consolidated Group at the end of the reporting period, the following table shows theamounts affecting profit before tax assuming that the interest rate increases by 1%.
Under the analysis, the amounts affecting profit before tax are calculated by multiplying the net balance of floating rate financial
instruments as of March 31, 2017 and 2016 by 1%, without considering future changes in the net balance, currency exchange
fluctuations and dispersing effects for floating rate borrowings derived from the difference in timing of refinancing and resetting of
the interest rate, and based on the assumption that all the other variables are held constant.
JPY
2017
Profit before tax

3)

USD
2017

2016
(758)

(749)

(6,761)

Commodity price risk(i) Nature of commodity price risk and its management policy
In its mainstay commodity trading business in Japan and overseas, the Consolidated Group deals with grains and petroleum products
as well as electronic parts and information, communications and technology (ICT) products. Grains and petroleum products will be
influenced by market conditions, while electronic parts and ICT products are exposed to the risk of frequent price erosion caused bycompetition and obsolescence resulting from technological innovation. When the positions in these commodities increase, theConsolidated Group will be exposed to the commodity price fluctuation risk stemming from rapid movements in commodities prices
or a decline in demand.
The Consolidate Group strives to reduce our exposure to price volatility by hedge-selling commodities, matching the quantity andtiming of buying and selling, and utilizing commodity-related derivatives for hedging purposes.
(ii) Sensitivity analysis of commodity price risk
In regards to commodity-related derivatives held by the Consolidated Group at the end of the reporting period, the following tableshows the amounts affecting profit before tax and other comprehensive income (before the tax effect) assuming that the commodity
price decreases by 1%.
The analysis is performed based on the assumption that all the other variables are held constant.
JPY
2017
Profit before tax
Foods
Fuels
Other comprehensive income
Foods
Fuels

USD
2017

2016
(88)
(68)
(19)
0
0
－

(58)
(52)
(5)
(4)
(4)
－

(785)
(612)
(173)
(4)
(4)
－

4) Share price risk(i) Nature of share price risk and its management policy
The Consolidated Group holds marketable securities, which are exposed to the market price fluctuation risk.
The Consolidated Group attempts to reduce share price risk by periodically reviewing its shares held by the Consolidated Group andselling those shares that it holds without strong rationale.

Continued
49

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(ii) Sensitivity analysis of share price risk
In regards to listed shares held by the Consolidated Group at the end of the reporting period, the following table shows the amounts
affecting other comprehensive income (before the tax effect) assuming that the share price decreases by 1%.
The analysis is performed based on the assumption that all the other variables are held constant.
JPY
2017

USD
2017

2016

Other comprehensive income

(160)

(140)

(1,427)(6) Fair value of financial instruments
1) Fair value measurement
Fair values of financial instruments are presented as follows:
Fair values are categorized into three levels of the fair value hierarchy depending on inputs to valuation techniques; details
are described in Note 2. Basis of Preparing Consolidated Financial Statements: (4) Use of estimates and judgments.
2) Financial instruments measured at amortized cost
2017
Type

JPY
Financial assets
Trade and other receivables
Other investments (Debt instrument
securities)
Guarantee deposits
Other financial assets
Total
Financial liabilities
Bonds and borrowings
Long-term lease obligations
Long-term deposits received
Long-term guarantee deposits received
Total

2016

Carrying amount

Carrying
amountFair value

USD

JPY

USD

Fair value
JPY

1,169

10,425

1,169

10,425

460

460

994

8,864

994

8,864

1,000

1,000

3,679
616
6,459

32,794
5,495
57,577

3,679
616
6,459

32,794
5,495
57,577

3,814
1,626
6,901

3,814
1,626
6,901

69,201
899
2,916
1,464
74,481

616,824
8,016
25,99913,052
663,891

69,289
899
2,916
1,464
74,569617,606
8,016
25,99913,052
664,673

74,877
1,025
3,050
1,396
80,35175,746
1,015
3,050
1,396
81,209The carrying amounts of short-term trade and other receivables, other short-term financial assets, short-term trade and other payables,
short-term bonds and borrowings and other short-term financial liabilities, all of which are measured at amortized cost, approximate theirfair values; therefore, those amounts are not included in the table above.
The fair values stated above are calculated as follows:(i) Trade and other receivables
The fair value of trade and other receivables is the present value of future cash flows discounted by an interest rate that reflects time
to maturity and credit risk.
(ii) Other investments (Debt instrument securities)
The fair value of other investments is the present value of future cash flows discounted by an interest rate applicable to similar
financial assets.
(iii)Guarantee deposits
The fair value of guarantee deposits is the present value of future cash flows discounted by an interest rate that reflects time tomaturity and credit risk.
(iv) Other financial assets
The fair value of other financial assets is the present value of future cash flows discounted by an interest rate that reflects time tomaturity and credit risk.
(v) Bonds and borrowings
The fair value of bonds is determined based on their market price.
The fair value of borrowings is the present value of the sum of principal and interest payments discounted using an assumed interest
rate on equivalent incremental borrowings.
(vi) Long-term lease obligations
The fair value of long-term lease obligations is the present value of future cash flows discounted by an interest rate that reflects time
to maturity and credit risk.

Continued
50

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(vii) Long-term deposits received
The fair value of the long-term deposits received is the present value of future cash flows discounted by an interest rate that reflects
time to maturity and credit risk.
(viii) Long-term guarantee deposits received
The fair value of long-term guarantee deposits received is the present value of future cash flows discounted by an interest rate thatreflects time to maturity and credit risk.
Financial assets and liabilities measured at amortized cost are categorized within Level 2 of the fair value hierarchy.
3) Financial instruments measured at fair value(i) Analysis of fair value by hierarchy level
The following tables provide the breakdown by hierarchy level of financial assets and liabilities that are measured at fair value on arecurring basis. No financial assets and liabilities are measured at fair value on a non-recurring basis. There were no materialtransfers between different levels for the fiscal years ended March 31, 2017 and March 31, 2016.
As of March 31, 2017
Level 1JPY
AssetsOther investments
Financial assets measured atfair value through profit or
loss
Stock
Financial assets measured atfair value through othercomprehensive income
Stock
Other financial assets
Financial assets measured atfair value through profit orloss
Convertible bonds
Derivative transactions:
Foreign exchangeInterest rate
Commodity
Liabilities
Other financial liabilities
Derivative transactions:
Foreign exchangeInterest rate
Commodity
Total

Level 2USD

JPY

Level 3
USD

JPY

Total
USD

JPY

USD

－

－

－

－

5,054

45,053

5,054

45,05316,014

142,742－－

12,049107,398

28,063

250,140

－

－

－

－

1,033

9,213

1,033

9,213

－
－
280

－
－
2,498

1,048
－
3

9,347
－
29

－
－
－

－
－
－

1,048
－
283

9,347
－
2,528

－
－
(317)
15,976－－(2,830)142,410

(740)
(838)
－
(526)

(6,600)(7,474)－(4,697)－－－
18,137－－－
161,665

(740)
(838)
(317)
33,587(6,600)(7,474)(2,830)299,378

As of March 31, 2016
Level 1JPY
AssetsOther investments
Financial assets measured at fair value
through profit or loss
Stock
Financial assets measured at fair value
through other comprehensive income
Stock
Other financial assets
Derivative transactions:
Foreign exchangeInterest rate
Commodity
Liabilities
Other financial liabilities
Derivative transactions:
Foreign exchangeInterest rate
Commodity
Total

Level 2JPY

Level 3
JPY

Total
JPY

－

－

5,637

5,637

14,061－

10,83624,897

－
－
174

200
－
4

－
－
－

200
－
179

－
－
(63)
14,172(2,546)(1,205)(14)(3,561)－－－
16,474(2,546)(1,205)(77)
27,084

Continued
51

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
The methods of determining the fair value of the above instruments are described as follows:(a) Other investments and convertible bonds
The fair value of listed shares is the quoted price in an active market, and is categorized within fair value hierarchy Level 1.
The fair value of unlisted shares is calculated using valuation methods including discounted future cash flows, market prices ofcomparable companies, net asset value, and other valuation methods, and is categorized within fair value hierarchy Level 3. Measuring
the fair value of unlisted shares involves the use of unobservable inputs such as discount rate and valuation multiples, as well as any
necessary adjustments including discounts for a lack of liquidity.
The fair value of convertible bonds is calculated using valuation methods including discounted future cash flows and net asset value,
and is categorized within fair value hierarchy Level 3.
The Company determines the policies and procedures for measuring the fair value of unlisted shares and convertible bonds, and reviews
the approach to measuring fair value on a recurring basis including the valuation model, by obtaining the information on business
operations and business plans associated with each equity issuer and confirming the data from comparable public companies.
(b) Derivative financial assets and liabilities
Currency-related derivatives
The fair value of forward exchange transactions is calculated based on the forward exchange rate at the end of the fiscal year.
Interest rate-related derivatives
The fair value of interest-rate swaps is the present value of future cash flows discounted by an interest rate that reflects time tosettlement, as well as market conditions.
Commodity-related derivatives
The fair value of commodity futures transactions is calculated using final prices on commodities exchanges as of the fiscal year-end.
The fair value of commodity swap transactions is calculated based on the index prices publicly announced at the end of the fiscal year.
Commodity futures transactions are categorized within Level 1 of fair value hierarchy. All other derivative financial assets and liabilities
are categorized within Level 2 of the fair value hierarchy.
(ii)

Recurring fair value measurements categorized within Level 3 of the fair value hierarchy
The changes in financial assets and liabilities that are measured at fair value on a recurring basis and are categorized within Level 3 ofthe fair value hierarchy are presented as follows. There were no material transfers between different levels for the years ended March
31, 2017 and March 31, 2016.
2017
Other investments
FVPL

Balance at the
beginning of the year
Total gains or losses
Profit or loss (Note1)
Other comprehensive
income (Note 2)
Purchase
Sale
Foreign currencytranslation difference
Increase (decrease) due
to changes in scope of
consolidation
Other
Balance at the end of
the year2016
Other financial
assets
FVOCI
JPY
USD

JPY

USD

FVOCI
JPY
USD

5,637

50,24910,836

96,593－(2,000)(17,832)

－

－

－

－

1,025

－
－

－
－

(79)

Other investments

Total

Total

JPY

USD

FVPL
JPY

－

16,474

146,841

6,425

12,362

18,788－－(2,000)(17,832)

(323)

－

(323)

9,138

－

－

1,025

9,138

－

(1,577)(1,577)

223
(36)

1,992
(324)

33
－

300
－

257
(36)

2,292
(324)

－
－

524
(472)

524
(472)

(710)

－

－

－

－

(79)

(710)

(375)

－

(375)

－

－

－

－

－

－

－

－

(89)

0

(89)

1,497

13,347

－

－

1,000

8,913

2,497

22,261

－

－

－

5,054

45,053

12,049107,398

1,033

9,213

18,137

161,665

5,637

10,836

16,474

FVPL: Financial assets measured at fair value through profit or loss.
FVOCI: Financial assets measured at fair value through other comprehensive income.

Continued
52

FVOCI
JPY

JPY

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
(Notes)1. The gains or losses are included in “Other finance costs” in the consolidated statement of income. Of those gains or losses
recognized in profit or loss, the amounts arising from financial instruments that were held at the period end are ¥(2,000) million($(17,832) thousand) for the fiscal year ended March 31, 2017 and ¥(323) million for the fiscal year ended March 31, 2016.
2. The gains or losses are included in “Financial assets measured at fair value through other comprehensive income” in the
consolidated statement of comprehensive income.

(iii) Quantitative Information about the financial instruments categorized within fair value hierarchy Level 3
The following tables present quantitative information on the material assets categorized within Level 3 of the fair value hierarchy,
which were measured at fair value on a recurring basis.
As of March 31, 2017
Fair value
Category

JPY

USD

Valuation techniqueSignificant
unobservable inputs

Weighted
average of input
valuesFinancial assets measured at fairvalue through profit or loss

3,590

32,006

Discounted cash flow
methodDiscount rate

3.7 %Financial assets measured at fairvalue through profit or loss

2,497

22,261

Net asset value method－－

Financial assets measured at fairvalue through othercomprehensive income

10,984

97,912Market multiple method

P/B ratio
Illiquidity discount

1.1 times
30.0 %

Financial assets measured at fairvalue through othercomprehensive income

1,064

9,486

Net asset value method－－

As of March 31, 2016
Category

Fair value

Valuation technique

JPY

Significant unobservable
inputs

Weighted
average of input
valuesFinancial assets measured at fair value
through profit or loss

5,637

Discounted cash flow
methodDiscount rate

3.5%

Financial assets measured at fair value
through other comprehensive income

9,733

Market multiple method

P/B ratio
Illiquidity discount

1.1 times
30.0%

Financial assets measured at fair value
through other comprehensive income

1,103

Net asset value method－－

The significant unobservable inputs used in measuring the fair value of unlisted shares are the discount rate, illiquidity discount and P/B ratio(price-to-book ratio). A substantial increase (or decrease) in the discount rate or illiquidity discount causes the fair value to substantially fall(or rise), while a substantial increase (or decrease) in the P/B ratio causes the fair value to substantially rise (or fall).

Continued
53

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
(7) Financial assets measured at fair value through other comprehensive income
With respect to investments in equity instruments held for the purpose of maintaining and strengthening relationships with business partners,
the Consolidated Group has designated such investments as financial assets to be measured at fair value through other comprehensive income
in view of the holding purpose.
1) Fair value of major items of investment
The following tables present the fair value of major items of investment in equity instruments designated as financial assets measured atfair value through other comprehensive income.
As of March 31, 2017
AmountName of issuer

JPY

USD

MARUDAI FOOD CO., LTD.

2,921

26,041

Tokio Marine Holdings, Inc.

2,815

25,100

Nissin Seifun Group Inc.

1,511

13,473

BOT Lease Co., Ltd.

1,414

12,608SHIN KURUSHIMA DOCKYARD CO., LTD.

1,304

11,627

Sotsu Corporation

1,190

10,614DAIO PAPER CORPORATION

1,093

9,748

The Norinchukin Bank

1,061

9,461

686

6,123

F.C.C. Co., Ltd.
Alpha Group Inc.
Other

634

5,658

13,427

119,687

As of March 31, 2016
AmountName of issuer

JPY

MARUDAI FOOD CO., LTD.

2,620

Tokio Marine Holdings, Inc.

2,277

Nissin Seifun Group Inc.

1,628

BOT Lease Co., Ltd.

1,311

Sotsu Corporation

1,258

The Norinchukin Bank

1,100

SHIN KURUSHIMA DOCKYARD CO., LTD.

1,099

DAIO PAPER CORPORATION

728

GUANGZHOU SHOWA AUTOPARTS CO., LTD.

590

F.C.C. Co., Ltd.

588

Other

11,692

2) Dividend income
JPY
2017
Investments derecognized during the year
Investments held at the end of the year
Total

USD
2017

2016
3
902
906

Continued
54

7
772
779

32
8,047
8,080

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
3) Financial assets measured at fair value through other comprehensive income that were derecognized during the fiscal year
The Consolidated Group periodically reviews its held shares and sells those shares that it holds without a strong rationale
with gains or losses on sale recognized in other comprehensive income. The following table presents the fair value on thedate of sale and cumulative gains or losses on sale.
JPY
2017
Fair value on the date of sale
Cumulative gains (losses) on sale

USD
2017

2016
647
132

605
393

5,772
1,178

4) Reclassification to retained earnings
The Consolidated Group reclassifies to retained earnings cumulative gains or losses arising from changes in the fair value of financial
assets measured at fair value through other comprehensive income in either of the following cases: when an investment is disposed of, or
when there is a significant decline in the fair value. Such cumulative gains or losses in other comprehensive income that were reclassified
to retained earnings for the years ended March 31, 2017 and March 31, 2016 were ¥125 million ($1,116 thousand) and ¥275 million,
respectively.

(8) Hedge Accounting(Cash Flow Hedge)
A cash flow hedge is a hedge of the exposure to variability in future cash flows arising from a forecast transaction or recognized assets or
liabilities. While a hedge is designated as cash flow hedge as long as the hedge is effective, the changes in the fair value of qualifying
hedging instrument should be recorded as other comprehensive income in the Consolidated Statement of Comprehensive Income. The
Consolidated Group continues such accounting treatment until variability in future cash flows arising from unrecognized forecast
transactions or recognized assets or liabilities designated as hedged items are recorded in profit or loss. Moreover, portions determined to beineffective for hedging accounting are recognized in profit or loss.
The Company and certain consolidated subsidiaries designate the following instruments as cash flow hedges: forward exchange contracts tofix cash flows from foreign currency denominated receivables and payables, foreign currency denominated firm commitments and foreign
currency denominated forecast transactions, interest rate swaps to fix variable interest rate on floating rate financial liabilities, andcommodity futures to fix cash flows from forecast transactions of commodity trade.
When applying hedge accounting, the Consolidated Group confirms that there are economic relationships between the hedged items andhedging instruments through qualitative assessments, which show whether the critical terms of the hedging instruments and the hedged items
match exactly or are closely aligned, and quantitative assessments, which show fluctuations of the value of hedged items and hedging
instruments by the same risk offset each other, in order to confirm there are economic relationships that variability in fair value or cash flowsof the hedged items that are attributable to the hedged risk shall be offset by the changes in fair value or cash flows of the hedging
instruments. The Consolidated Group also establishes appropriate hedge ratios considering an economic relationship between hedging
instruments and hedged items as well as risk management strategy.
The amounts recognized in profit or loss for the ineffective portion of the hedge are not material both for the fiscal years ended March 31,2017 and March 31, 2016. In addition, the amounts reclassified from valuation differences on cash flow hedges to profit or loss are
immaterial because the forecast transactions are no longer expected to occur.
Following are the carrying amounts of the hedging instruments as of March 31, 2017 and March 31, 2016. The fair value of financial assets
related to hedging instruments is included in “Other financial assets” while the fair value of financial liabilities related to hedging
instruments is included in “Other financial liabilities (current)” or “Other financial liabilities (non-current)” in the consolidated statements offinancial position.

Continued
55

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
As of March 31, 2017
Carrying amount
Derivative assets
Derivative liabilities
JPY
USD
JPY
USD

Notional amount
JPY
Foreign currency risk
Forward exchange contracts
Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts

USD

30,026

267,636

503

4,490

250

2,234

28,600254,925

－

－

838

7,474

435

3,884

16

147

4

43

As of March 31, 2016
Carrying amount
Derivative assets
Derivative liabilities
JPY
JPY

Notional amount
JPY
Foreign currency risk
Forward exchange contracts
Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts

20,88358764

29,000

－

1,205

547

16

4

The longest terms of hedging cash flow fluctuation risks by “Forward exchange contracts”, “Interest rate swap contracts” and “Commodity pricerisk” are about 2 years, 5 years 6 months and 1 year, respectively.
The following tables present the carrying amount of cash flow hedge reserve as of March 31, 2017 and March 31, 2016.
As of March 31, 2017
Cash flow hedge reservefor continuing hedges(before tax)
JPY
USD
Foreign currency risk
Forward exchange contracts
Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts

Cash flow hedge reservefor discontinuing hedge accounting(before tax)
JPY
USD

253

2,256

－

－

(838)

(7,474)

－

－

11

104

8

75

As of March 31, 2016
Cash flow hedge reservefor continuing hedges(before tax)
JPY
Foreign currency risk
Forward exchange contracts
Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts

Cash flow hedge reservefor discontinuing hedge accounting(before tax)
JPY
(706)

－

(1,205)

－

12

(51)

The following tables present the carrying amounts of transactions that affected the consolidated statements of comprehensive income as a resultof applying hedge accounting for the fiscal years ended March 31, 2017 and March 31, 2016.
Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)
Change in value of hedging
instruments recognized in othercomprehensive income
JPY
USD
Foreign currency risk
Forward exchange contracts
352
3,139
Interest rate risk
Interest rate swap contracts
96
862
Commodity price risk
Commodity futures contracts
19
170

Reclassification from cash
flow hedge reserve to profit or
loss
JPY
USD

Continued
56

Line item for which profit orloss was affected byreclassification

607

5,415

Other income

270

2,412

Interest expenses

40

358

Cost of sales

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
Fiscal year ended March 31, 2016 (from April 1, 2015 to March 31, 2016)
Change in value of hedging
instruments recognized in othercomprehensive income
JPY
Foreign currency risk
Forward exchange contracts(745)Interest rate risk
Interest rate swap contracts(396)
Commodity price risk
Commodity futures contracts
44

Reclassification from cash
flow hedge reserve to profit or
loss
JPY

Line item for which profit orloss was affected byreclassification(1,102)Other income

5Interest expenses

37

Cost of sales(9) Transfer of financial assets
The Consolidated Group liquidates certain trade receivables by discounting notes or the like. However, with respect to some liquidated
receivables, the Consolidated Group may be obligated to make payments as recourse for non-payment by the debtor. The Consolidated
Group continues to recognize such liquidated receivables as they do not meet the criteria for derecognition of financial assets.
The Consolidated Group recognized such liquidated assets as “Trade and other receivables” in the amount of ¥7,509 million ($66,939
thousand) and ¥1,771 million as of March 31, 2017 and March 31, 2016, respectively. In addition, liabilities relating to the deposit amounts
which arose upon the transfer of such assets were accounted for as “Bonds and borrowings” in the amount of ¥7,509 million ($66,939
thousand) and ¥1,771 million as of March 31, 2017 and March 31, 2016, respectively. Such liabilities are settled when payments for suchliquidated assets are made, and the Consolidated Group may not use such liquidated assets until such settlement occurs.

(10) Offsetting financial assets and financial liabilities
The following tables present the financial assets and financial liabilities recognized for the same counterparties including financial
instruments that were not offset even though they were covered by an enforceable master netting arrangement or similar agreement because
they did not meet some or all of the offsetting criteria as of March 31, 2017 and March 31, 2016.

JPY
2017
Amounts of financial assets presented in the consolidated statement offinancial position
Foreign exchangeInterest rate
Commodity
Amounts that were not offset even though they were covered by an
enforceable master netting arrangement or similar agreement because
they did not meet some or all of the offsetting criteria
Net amounts

USD
2017

2016
1,332

379

11,875

1,048
－
283

200
－
179

9,347
－
2,528

(695)

(186)

(6,203)

636

192

5,672

JPY
2017
Amounts of financial liabilities presented in the consolidated
statements of financial position
Foreign exchangeInterest rate
Commodity
Amounts that were not offset even though they were covered by an
enforceable master netting arrangement or similar agreement because
they did not meet some or all of the offsetting criteria
Financial collateral pledged
Net amounts

USD
2017

2016
1,896

3,829

16,904

740
838
317

2,546
1,205
77

6,600
7,474
2,830

(695)

(186)

(6,203)

(276)
924

(4)
3,638

(2,463)
8,237

Certain financial assets and financial liabilities have not been offset because they do not meet some or all of the criteria for offsetting
financial assets and financial liabilities. The rights to offset such financial assets and financial liabilities become enforceable only underparticular circumstances, such as when the other party fails to discharge an obligation due to its bankruptcy or other such reasons.

Continued
57

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
31. Leases(1) Lessee
1) Finance leases
The Consolidated Group leases computer-related equipment for the enterprise system (tools, furniture and fixtures) and other assets forfinance leases.
The carrying amounts of the leased assets, net of accumulated depreciation and accumulated impairment losses, as ofMarch 31, 2017 and March 31, 2016 are as follows:
JPY
2017
Machinery, equipment, vehicle, tools and fixtures
Other
Total

USD
2017

2016
1,002
145
1,148

1,218
58
1,276

8,939
1,295
10,235

The future minimum lease payments for finance leases as of March 31, 2017 and March 31, 2016 are as follows:
Future minimum lease payments
JPY
2017
Within one year
Between one and five years
Over five years
Total
Less future finance costs
Present value of future
minimum lease payments

USD
2017

2016

436
939
62
1,437
(152)

486
1,108
19
1,613
(163)

3,891
8,370
554
12,816(1,360)

1,285

1,449

11,456

Present value of
future minimum lease payments
JPY
USD
2017
2016
2017
387
433
845
997
52
18
1,285
1,449

3,450
7,534
472
11,456

The future minimum lease payments receivable under the non-cancellable subleases as of March 31, 2017 and March 31, 2016 are ¥12
million ($115 thousand) and ¥54 million, respectively.
2) Operating leases
The Consolidated Group leases office buildings, system equipment and other assets as cancellable or non-cancellable
operating leases. The future minimum lease payments for non-cancellable operating leases as of March 31, 2017 and March
31, 2016 are as follows:
JPY
2017
Within one year
Between one and five years
Over five years
Total

USD
2017

2016
34
43
－
77

10
19
－
30

308
387
－
695

The total lease payments recognized as expenses under the cancellable or non-cancellable operating leases for the fiscal year ended
March 31, 2017 and March 31, 2016 are ¥6,980 million ($62,219 thousand) and ¥5,981 million, respectively.
The future minimum lease payments receivable under the non-cancellable subleases as of March 31, 2017 and March 31, 2016 are ¥37
million ($337 thousand) and ¥38 million, respectively.

(2) Lessor
1) Finance leases
The Consolidated Group leases out machinery, equipment and other assets that are classified as finance leases. The future
minimum lease payments receivable for finance leases as of March 31, 2017 and March 31, 2016 are as follows:

Within one year
Between one and five years
Over five years
Total
Unguaranteed residual valueLess future finance income
Present value of future
minimum lease payments
receivable

Future minimum lease payments receivableand unguaranteed residual value
JPY
USD
2017
2016
2017
5
4
51
22
17
204
13
13
124
42
35
379
－
－
－
(14)
(12)
(128)
28

23

251

Continued
58

Present value of
future minimum lease payments receivable
JPY
USD
2017
2016
2017
3
3
34
15
12
135
9
8
82
28
23
251

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201732. Pledged Assets(1) Pledged assets and associated secured obligations
Details of pledged assets and associated secured obligations are as follows:
JPY
2017
Pledged assets:
Other financial assets (non-current)
Property, plant and equipment
Total
Associated secured obligations:Short-term borrowings (current)Long-term borrowings (non-current)
Other
Total

USD
2017

2016
47
658
706

23
653
676

427
5,868
6,295

1,101
732
－
1,833

1,806
231
1
2,039

9,819
6,526
－
16,345

Trust receipts issued under customary import financing arrangements give banks a security interest in the goods imported or sales proceeds
resulting from the sales of the goods. However, due to the large volume of transactions, it is impracticable to determine the aggregate amounts ofassets covered by outstanding trust receipts and those transactions were not included in the above amounts.

(2) Assets pledged in lieu of guarantee money
The breakdown of assets pledged in lieu of guarantee money or the like is as follows:
JPY
2017
Assets pledged in lieu of guarantee money or guarantee
funds
Other financial assets (current)
Other financial assets (non-current)
Other investments
Total

USD
2017

2016

36
－
3,118
3,155

71
14
2,692
2,779

330
－
27,801
28,13033. Contingent Liabilities
The Consolidated Group is contingently liable for guarantees on bank borrowings and trade payables owed by entities that do not belong to
the Consolidated Group.
The Group may become responsible for the amounts that are unpayable by the borrower and for losses attached to the unpayableamounts.
JPY
2017
Debt guarantees for equity method investees
Debt guarantees for third parties
Total

USD
2017

2016
537
1,344
1,881

489
988
1,477

4,793
11,98016,773（Notes）1. The above amounts include those for quasi-guarantee acts.
（Notes）2. Debt guarantees for third parties include the debt guarantees covered by the insurance agreements that is limited to ¥1,276 million（Notes）1. ($11,381 thousand) for the fiscal year ended March 31, 2017 and ¥ 939 million for the fiscal year ended March 31, 2016,（Notes）1. respectively.

Continued
59

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201734. Significant Subsidiaries(1) Significant subsidiaries of the Company are as follows:
Trade nameLocation

Details of major operations

Percentage of voting rights (%)
2017
2016

[Electronics & Devices]
Kanematsu Electronics Ltd.

Chuo-ku, Tokyo, Japan

System integration of ICT and communications
equipment

58.32(0.40)

58.32(0.40)

Nippon Office Systems Ltd.

Chuo-ku, Tokyo, Japan

Development of software for and sales and maintenanceof computers and computer peripherals, etc.

100.00(100.00)

100.00(100.00)

Kanematsu Communications
Ltd. *1

Shibuya-ku, Tokyo,
Japan

Sales of mobile communications devices; Mobile internet
systems and services

100.00100.00Kanematsu Granks, Corp.

Shinjuku-ku, Tokyo,
Japan

Mobile contents delivery and mobile-related solution
business

89.05(89.05)89.05(89.05)

Kanematsu BD
Communications Ltd.

Kurume-shi, Fukuoka,
Japan

Sales of mobile communication device

100.00(100.00)

100.00(100.00)

Kanematsu Sustech Corp.

Chuo-ku, Tokyo, Japan

Manufacture and sales of home-construction materials;
Ground inspection services and improvement work; Salesof security systems

52.96

52.96

Kanematsu Advanced
Materials Corp.

Chuo-ku, Tokyo, Japan

Import, export, storage, sales, and processing of materials
and components for vehicle equipment, industrial
electronics, and communication devices

100.00100.00

Diamondtelecom, Inc. *1

Chuo-ku, Tokyo, Japan

Sales of mobile communication device and related
products

100.00－Tanashin (Europe) GmbH

Duesseldorf, Germany

Sales and maintenance of parts for car audio systems

100.00(20.00)100.00(20.00)

Kanekoh Electronics(Shanghai) Co., Ltd.

Shanghai, China

Development, manufacture, and sales of control modules
for lithium ion batteries

70.00

70.00

Kanematsu Industrial andTrading (Dalian F.T.Z.) Co.,Ltd.

Dalian, China

Manufacture of materials for electronic precision parts
and import, export and sales of electronic components

100.00(100.00)

100.00(100.00)

Continued
60

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
Trade nameLocation

Details of major operations

Percentage of voting rights (%)
2017

2016

[Foods & Grain]
Kanematsu Shintoa Foods
Corp.

Minato-ku, Tokyo, Japan Food wholesaling and cold storage

100.00100.00Kanematsu Agritec Co., Ltd.

Matsudo-shi, Chiba,
Japan

Manufacture and sales of feed and fertilizer

100.00100.00Kanematsu Soytech Corp.

Chuo-ku, Osaka, Japan

Sales of soybeans, millet, and grain

100.00100.00

North Pet Co., Ltd.

Kuriyama-cho,Yubari-gun, Hokkaido,
Japan

Manufacture of pet snacks (jerky, dried meat, biscuits)

100.00100.00KG Agri Products, Inc.

Ohio, U.S.A.

Seed development; Contract farming; Sorting, processing,and sales of food soybeans

100.00100.00Kai Enterprises, Inc.

Washington, U.S.A.

Sales of hay and roughage

100.00(15.00)100.00(15.00)P.T. Kanemory Food Service

Serang, Indonesia

Manufacture of processed foods for central kitchen andhome-meal replacement

59.90(10.00)59.90(10.00)Kanematsu Trading Corp.

Chuo-ku, Tokyo, Japan

Sales of steel and construction materials

100.00100.00

Kyowa Steel Co., Ltd.

Kasai-shi, Hyogo, Japan

Cutting and processing of steel sheet; Sales of
construction materials

100.00(100.00)

100.00(100.00)

Kanematsu Chemicals Corp.

Chuo-ku, Tokyo, Japan

Sales of petrochemicalsand automobile-related chemicals

100.00100.00Kanematsu Wellness Corp.

Chuo-ku, Tokyo, Japan

Sales of health foods and provision of medical
information

100.00(100.00)

100.00(100.00)

Kanematsu Petroleum Corp.

Chiyoda-ku, Tokyo,
Japan

Sales of petroleum products and LPG

100.00100.00Kanematsu Yuso Co., Ltd.

Chiyoda-ku, Tokyo,
Japan

Delivery and storage of petroleum products and LPG

100.00100.00Kanematsu KGK Corp.

Nerima-ku, Tokyo,
Japan

Sales of machine tools and industrial machinery

97.89

97.89

Benoit Holding Company

Illinois, U.S.A.

Holding company

85.18(85.18)85.18(85.18)

Benoit Premium Threading,
LLC

Louisiana, U.S.A.

Oil well casing fabrication; Manufacture and sales of oil
well-related parts

54.00(54.00)54.00(54.00)

Steel Service
Oilfield Tubular, Inc.

Oklahoma, U.S.A.

Sales of steel materials for oil excavation

51.00(51.00)51.00(51.00)KGK International Corp.

Illinois, U.S.A.

Sales of machine tools

100.00(100.00)

100.00(100.00)[Steel, Materials & Plants]

Continued
61

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
Trade nameLocation

Details of major operations

Percentage of voting rights (%)
2017

2016

[Motor Vehicles & Aerospace]
Kanematsu Aerospace Corp.

Minato-ku, Tokyo,
Japan

Sales of aircraft, defense, and aerospace-related products

100.00100.00Aries Motor Ltd.

Warsaw, Poland

Sales of automobiles

93.59

93.59

Aries Power Equipment Ltd.

Warsaw, Poland

Sales of engines, generators, and other general-purpose
machinery

60.00

60.00

Replacement and maintenance of aircraft rotablecomponents; Leasing

96.67

96.67

KG Aircraft Rotables Co., Ltd. Dublin, Ireland[Others]
Aso Kanko Kaihatsu Co., Ltd.

Minato-ku, Tokyo,
Japan

Golf course management

100.00100.00

Shintoa Corp.

Chiyoda-ku, Tokyo,
Japan

Beverage-vending machine operations; Imports, exports,and sales of aircraft engines and feedstuffs

100.00100.00Kanematsu Logistics &Insurance Ltd.

Chuo-ku, Tokyo, Japan

Insurance agency; Consigned freight forwarding business100.00Kanematsu USA Inc.

Illinois, U.S.A.

Export, import and sales of merchandise

100.00100.00Kanematsu (Hong Kong) Ltd.

Hong Kong, China

Export, import and sales of merchandise

100.00100.00Kanematsu (China) Co., Ltd.

Shanghai, China

Export, import and sales of merchandise

100.00(100.00)

100.00(100.00)

Kanematsu (Thailand) Ltd.

Bangkok, Thailand

Export, import and sales of merchandise

100.00(100.00)

100.00(100.00)

Watana Inter-Trade Co., Ltd.

Bangkok, Thailand

Export, import and sales of merchandise

49.00(49.00)49.00(49.00)Kanematsu (Singapore) Pte.
Ltd.

Singapore, Singapore

Export, import and sales of merchandise

100.00(100.00)

100.00(100.00)

Kanematsu Taiwan Corp.

Taipei, Taiwan

Export, import and sales of merchandise

100.00(100.00)

100.00(100.00)

Kanematsu Europe Plc

London, U.K.

Export, import and sales of merchandise

100.00(100.00)

100.00(100.00)

Kanematsu GmbH

Duesseldorf, Germany

Export, import and sales of merchandise

100.00100.00Kanematsu Australia Ltd.

Sydney, Australia

Export, import and sales of merchandise

100.00100.00Kanematsu New Zealand Ltd.

Auckland, New Zealand Export, import and sales of merchandise

100.00100.00100.00[Overseas local subsidiaries]

Notes: 1
2

Effective April 1, 2017, Kanematsu Communications Ltd. and Diamondtelecom,Inc. were merged, and Kanematsu Communications
Ltd. is the surviving company.
The figures in the parentheses in “Percentage of voting rights” indicate the indirect ownership ratio included in the total.

Continued
62

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017
(2) Non-controlling interests
The subsidiary with non-controlling interests that is significant for the Consolidated Group is Kanematsu Electronics Ltd. Its condensed
financial information is presented as follows. The amounts presented below are before the elimination of intra-company transactions.
[Condensed statement of financial position]
JPY
2017
Current assets
Current liabilities
Current assets (net)Non-current assets
Non-current liabilities
Non-current assets (net)
EquityCumulative amounts of non-controlling interests

USD
2017
497,268
150,338
346,93152,367
23,95728,410375,341
157,061

2016
55,78816,86638,922
5,875
2,687
3,187
42,10917,62048,217
13,90934,307
7,511
3,177
4,333
38,641
16,180[Condensed statements of income and comprehensive income]
JPY
Revenue
Profit for the year
Other comprehensive income
Total comprehensive income
Profit for the year attributable to non-controlling interests
Dividends paid to non-controlling interests

2017
64,175
5,499
280
5,780
2,303
954

2016
61,305
4,310
(285)
4,025
1,807
835

USD
2017
572,027
49,022
2,505
51,526
20,535
8,508

2016
5,067
(171)
(2,479)
2,416

USD
2017
55,475
12,791(20,575)
47,691[Condensed statement of cash flows]
JPY
2017
6,223
1,435
(2,308)
5,350

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Increase (decrease) in cash and cash equivalents, net(3) Transaction with non-controlling interests
There was no transaction with significant non-controlling interests for the fiscal year ended March 31, 2017 and March 31, 2016.

35. Related Parties(1) Related party transactions
For the fiscal year ended March 31, 2017
Type

Name

Detail of related party
relationshipTransaction amount
JPY
USD

Outstanding amount
JPY
USD

Associate(including subsidiaries of theassociate)

Kantatsu Co., Ltd.

Purchase of merchandise

6,570

58,569804

7,175

Associate

Growth D LTD.

Purchase of merchandise

3,245

28,933535

4,772

Associate

Sage Hill
Northwest, Inc.

Purchase of merchandise

1,011

9,012

111

993

(Notes) 1. The related party transaction amounts are determined through negotiation with consideration given to the prevailing market prices.
2. As described in Note 33 Contingent Liabilities, debt guarantees are provided to the equity method investees.
For the fiscal year ended March 31, 2016
Type
Associate(including subsidiaries of theassociate)

Name
Kantatsu Co., Ltd.

Detail of related party
relationship
Purchase of merchandise

Transaction amount
JPY

Outstanding amount
JPY

8,603

486

(Notes) 1. The related party transaction amounts are determined through negotiation with consideration given to the prevailing market prices.
2. As described in Note 33 Contingent Liabilities, debt guarantees are provided to the equity method investees.

Continued
63

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2017(2) Remuneration to management executives
The amount of remuneration to the Company’s directors for the fiscal years ended March 31, 2017 and March 31, 2016 is ¥277 million($2,472 thousand) and ¥202 million, respectively. The remuneration to the directors consists of base salary and directors’ bonus. The
remuneration to the auditors consists of base salary.

36. Subsequent Events
At the Board of Directors meeting held on May 10, 2017, the Company resolved to submit proposals for share consolidation (from 5 shares to 1
share) and the change in the share unit (from 1,000 shares to 100 shares) and the total number of authorized shares (from 1,016,653,604 shares to
200,000,000 shares) to its 123rd Ordinary General Meeting of Shareholders to be held on June 23, 2017. The proposals were approved at theOrdinary General Meeting of Shareholders.

(1) Reason for the share consolidation and change in share unit
The Japanese Stock Exchanges published the Action Plan for Consolidating Trading Units which seeks to standardize the trading units (share
units) for common shares issued by all listed domestic corporations at 100 shares. As a corporation listed on the Tokyo Stock Exchange, theCompany respects the purport of this plan and decided to change its share unit from 1,000 shares to 100 shares. Moreover, in order to adjust
the investment unit to a required level by the Japanese Stock Exchange (more than ¥ 50,000, less than ¥ 500,000) with the change in shareunit, the Company will conduct the share consolidation.

(2) Details of the share consolidation
1) Class of shares to be consolidated
1) Common shares
2) Consolidation method and ratio1) Every five shares held by shareholders recorded in the register of shareholders as of the end of September 30, 2017 will be consolidated
into one share on October 1, 2017.
3) Decrease in number of shares due to consolidation (as of March 31, 2017)
1) Number of shares outstanding before share consolidation: 422,501,010 shares
1) Decrease in number of shares due to share consolidation: 338,000,808 shares
1) Number of shares outstanding after share consolidation: 84,500,202 shares1) (Note) “Decrease in number of shares due to share consolidation” and “Number of shares outstanding after share consolidation” aretheoretical figures calculated based on the number of shares outstanding before share consolidation and the consolidation ratio. The
Company does not issue stock acquisition rights.

(3) Handling of fractional shares less than one share
If a fraction of less than one share is created due to the share consolidation, all such fractional shares will be sold together in accordance with
Article 235 of the Companies Act. The proceeds will be distributed to shareholders who held the fractional shares in proportion to thenumber of fractional shares.

(4) Change in share unit
On October 1, 2017, the share unit will change from 1,000 shares to 100 shares.
(Note) As described above, while the effective date of the change in the number of shares per share unit and the share consolidation will be
October 1, 2017, the trading unit will be changed from 1,000 shares to 100 shares at the Tokyo Stock Exchange on September 27, 2017
because of the book-entry procedure following trades of shares.

(5) Change in total number of authorized shares
On October 1, 2017, the total number of authorized shares will change from 1,016,653,604 shares to 200,000,000 shares.

(6) Effect on per share information
Assuming that the share consolidation had taken place at the beginning of the previous fiscal year, per share information for the fiscal years
ended March 31, 2017 and March 31, 2016 would be as follows:
Yen
Equity attributable to owners of the parent per share
Basic earnings per share(Attributable to owners of the parent)

2017
1,192.21

2016
1,088.45

U.S. dollar
2017
10.63

95.64

106.460.85(Note) Diluted earnings per share is not presented as there are no shares with a dilutive effect.

End64