Lawson, Inc. and its Consolidated Subsidiaries
Consolidated Balance Sheet
February 28, 2021

Thousands ofMillions of Yen
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Time deposits
Accounts receivable:
Due from franchised stores (Note 3)
Other
Allowance for doubtful accounts
Lease receivables (Note 4)Inventories
Other
Total current assets

Millions of Yen

U.S. Dollars

2021

2020

(Note 1)2021

¥401,137
1,447¥343,583
4$3,775,407
13,61946,386
165,013(21)
16,622
20,65839,570690,81247,367
162,142(43)
17,877
20,98544,783636,698

436,574
1,553,064(198)
156,442
194,428
372,4246,501,760

PROPERTY AND STORE
EQUIPMEMT:Land (Notes 6 and 7)
Buildings (Note 6)
Furniture, fixtures, and equipment(Note 6)
Lease assets (Note 6)
Other (Note 6)
Total
Accumulated depreciation
Net property and store equipment

8,468
388,834

8,913
387,223

79,6993,659,614

80,960246,720
28,550753,532(385,892)
367,640

79,188
261,556
22,875
759,755(366,817)
392,938

761,976
2,322,071
268,706
7,092,066(3,631,925)
3,460,141

INVESTMENTS AND OTHERASSETS:
Investment securities (Note 5)
Investments in associated companies
Long-term loans receivable
Goodwill (Note 6)
Software (Note 6)
Trademark rightLease deposits
Deferred tax assets (Note 16)
Other (Note 6)
Allowance for doubtful accounts
Total investments and other assets
TOTAL

8,367
21,166
40,621
38,21539,0898,350
103,030
33,484
15,319(663)
306,978¥1,365,430

9,948
20,51842,48842,38245,152
8,850
107,193
34,37817,818(630)
328,097¥1,357,733

78,748199,209382,315359,671367,896
78,588969,695
315,144
144,179(6,240)2,889,205$12,851,106

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Accounts payable:
Trade (Notes 8 and 20)
Due to franchised stores (Note 9)
Other
Short-term loans (Note 10)
Current portion of long-term debt (Note 10)
Income taxes payable
Deposits received
Other (Note 13)
Total current liabilities
LONG-TERM LIABILITIES:Net defined benefit liability (Note 12)
Allowance for retirement benefits to
executive officers
and audit and supervisory board members
Long-term debt (Note 10)
Asset retirement obligations (Note 13)
Deferred tax liabilities (Note 16)
Other
Total long-term liabilities
EQUITY (Note 14):
Common stock—authorized, 409,300,000
shares in 2021
and 2020; issued, 100,300,000 shares in
2021 and 2020
Capital surplus
Stock acquisition rights
Retained earnings
Treasury stock—at cost, 232,954 shares in
2021 and
237,762 shares in 2020
Accumulated other comprehensive
Income:Net unrealized gain on available-for-salesecurities
Land revaluation difference (Note 7)
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests
Total equity
TOTAL*See notes to consolidated financial statements.
*Figures are rounded off less than a unit.

-1-

Thousands of
U.S. Dollars(Note 1)
2021

2021

2020

¥127,487
1,703
90,33542,320144,585
4,079
246,111111,135
767,755¥129,398
1,860
94,44839,85045,6107,916
193,097
49,784561,963$1,199,878
16,028850,212398,306
1,360,800
38,3912,316,339
1,045,975
7,225,929

16,27816,246

153,205277
251,492
35,694486
20,516
324,743283
446,666
35,336522
21,370520,423

2,607
2,366,984
335,944
4,574
193,091
3,056,405

58,50746,495334
158,498

58,50744,605256
165,081

550,654437,600
3,144
1,491,746(991)(1,011)(9,327)

1,782
(208)
3,684
(135)
267,966
4,966
272,932¥1,365,430

1,497
(208)
3,341
(935)
271,133
4,214
275,347¥1,357,733

16,772(1,958)34,673(1,271)
2,522,033
46,7392,568,772$12,851,106

Lawson, Inc. and its Consolidated Subsidiaries
Consolidated Statement of Income
Year Ended February 28, 2021
Millions of Yen

OPERATING REVENUES:Franchise commissions from
franchised stores
Net sales
Other
Total operating revenues
COSTS AND OPERATING
EXPENSES:
Cost of sales (Note 20)
Selling, general, andadministrative expenses
Total costs and operating
expenses
Operating income
OTHER INCOME(EXPENSES):Interest expense—net
Compensation income
Employment adjustment subsidy
due to novel coronavirus
diseaseLoss on cancellation of leases
Equity in earnings ofunconsolidated subsidiaries andassociated companies
Gain on sales of investment
securities
Loss on sales of non-current assets
Loss on disposal of property andstore equipment
Impairment of long-lived assets(Note 6)
Expense due to system failure
Loss on novel coronavirus disease
Other—net
Other expenses—net
INCOME BEFORE INCOMETAXES
INCOME TAXES (Note 16):
Current
Deferred
Total income taxes
NET INCOME
NET INCOME
ATTRIBUTABLE TONONCONTROLLINGINTERESTS
NET INCOME
ATTRIBUTABLE TOOWNERS OF THE
PARENT

Thousands of
U.S. Dollars(Note 1)
2021

2021

2020

¥288,480
275,945
101,577
666,002¥314,261
302,843
113,133
730,237$2,715,106
2,597,129
956,019
6,268,254

188,442

205,746

1,773,572

436,683

461,548

4,109,957

625,125
40,877667,294
62,943

5,883,529
384,725(2,544)490(3,284)681(23,944)4,612

794(2,066)(3,675)

7,473(19,445)

333

571

3,134

6,233
(296)

165
(508)

58,664(2,786)(3,213)(6,121)(30,240)(16,635)(828)(3,607)(1,308)(22,647)(18,722)(632)(1,098)(32,623)(156,565)(7,793)(33,948)(12,310)(213,148)

18,23030,320171,576

9,197
379
9,576

12,814(2,563)
10,251

86,5603,567
90,127

8,654

20,06981,449

(36)

(39)

(339)

¥8,690¥20,108$81,788-2-(Continued)

Lawson, Inc. and its Consolidated Subsidiaries
Consolidated Statement of Income
Year Ended February 28, 2021
Yen
2021
PER SHARE OF COMMON STOCK(Notes 2.v and 22):
Net income—basic
Net income—diluted
Cash dividends applicable to the year

U.S. Dollars
2020¥86.8486.78
150.0¥200.95
200.84
202.5

2021

$0.82
0.82
1.42

*See notes to consolidated financial statements.
*Figures are rounded off less than a unit.

Lawson, Inc. and its Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended February 28, 2021

NET INCOME

Millions of Yen
2021
2020
¥8,654¥20,069

Thousands of
U.S. Dollars (Note 1)
2021$81,449

OTHER COMPREHENSIVE INCOME:
Unrealized gain (loss) on available-for-salesecurities
Land revaluation difference
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income
COMPREHENSIVE INCOME

285(1,852)

2,683

307
800
1,392
¥10,046(543)(87)(2,482)¥17,587

2,889
7,529
13,101$94,550TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO(Note 18):
Owners of the parent
Noncontrolling interests¥10,118(72)¥17,5807$95,228(678)*See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

-3-

Lawson, Inc. and its Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended February 28, 2021
Thousands of Shares/Millions of Yen
Treasury Stock

Common Stock

BALANCE, MARCH 1, 2019
Cumulative effects of changes inaccounting policies
Restated balance
Net income attributable to owners of theparentChange in the parent’s ownership interest
due totransactions with noncontrollinginterests
Year-end cash dividends, ¥127.5 per
shareInterim cash dividends, ¥75.0 per share
Reversal of land revaluation difference
Purchase of treasury stock
Exercise of stock acquisition rights toshares(delivery of treasury stock)
Others—net
BALANCE, FEBRUARY 29, 2020
Net income attributable to owners of theparentDecrease by merger
Change in the parent’s ownership interest
due totransactions with noncontrollinginterests
Year-end cash dividends, ¥75.0 per share
Interim cash dividends, ¥75.0 per share
Reversal of land revaluation difference
Purchase of treasury stock
Exercise of stock acquisition rights toshares(delivery of treasury stock)
Disposal of treasury stock
Others—net
BALANCE, FEBRUARY 28, 2021

Shares100,300

Amount¥58,507

CapitalSurplus¥46,984

Stock
Acquisition
Rights¥216

Retained
Earnings¥166,188

Shares(241)

Amount¥ (1,029)

Net
Unrealized
Gain (Loss)on Availablefor-Sale
Securities¥3,349

Accumulated other comprehensive income

Land
Revaluation
Difference¥ (567)

Foreign
Currency
Translation
Adjustments¥3,931Remeasurements ofdefinedbenefitplans¥ (848)(593)
100,300

58,507

46,984

216

165,595
20,108

(593)
(241)

(1,029)

3,349

(567)

3,931

(848)

(2,375)¥44,605(12,758)(7,505)(359)(7,505)
(359)
(1)
15

(7,505)
(359)
(1)
15

¥165,081

(1)
19

(237)

¥(1,011)(1,852)

359

(590)

(87)

(2,130)(1,037)(3,167)¥1,497¥(208)¥3,341¥(935)¥271,133¥4,214¥275,347

8,690

8,690

8,690

(263)

(263)
1,887

(263)
1,887

(7,505)(7,505)(7,505)(7,505)(7,505)(7,505)

(1)
24

(1)
24

3

0

100,300¥58,507¥46,495

281,388
20,108(12,758)

1,887

78
¥334

5,251

(12,758)

4

¥256

(593)

(2,375)40¥58,507

276,136
20,108Total
Equity¥281,982(2,375)(4)

100,300

Total¥276,731

Noncontroll
ingInterests¥5,251¥158,498

4

(1)
21

0

0

(233)

-4-

¥(991)

285¥1,782¥(208)

343¥3,684800¥(135)

01,506¥267,966

752¥4,96602,258¥272,932

BALANCE, FEBRUARY 29, 2020
Net income attributable to owners of
the parent
Decrease by merger
Change in the parent’s ownershipinterest due totransactions with noncontrollinginterests
Year-end cash dividends, $0.71 per
shareInterim cash dividends, $0.71 per
share
Reversal of land revaluation difference
Purchase of treasury stock
Exercise of stock acquisition rights toshares(delivery of treasury stock)
Disposal of treasury stock
Others—net
BALANCE, FEBRUARY 28, 2021

CommonStock$550,654

CapitalSurplus$419,812

Stock
Acquisition
Rights$2,409Retained
Earnings$1,553,704
81,788TreasuryStock$ (9,515)

Thousands of U.S. Dollars (Note 1)
Accumulated other comprehensive income
Foreign
Net Unrealized GainLand
Remeasurements
Currency(Loss) on AvailableRevaluation
Translationof defined
for-Sale Securities
Difference
benefit plans
Adjustments$14,089$(1,958)$31,445$ (8,800)(2,475)
17,760(70,636)(70,636)(70,636)(70,635)(70,635)(70,635)

(10)
226

(10)
226

(10)
198

0

0
735
$3,144

Total
Equity$2,591,501
81,788(2,475)
17,76028$437,600

Noncontrolling
Interests$39,661(2,475)
17,760$550,654

Total$2,551,840
81,7882,683$1,491,746$ (9,327)$16,772*See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

-5-$ (1,958)

3,228

7,529

0
14,1757,078

021,253$34,673$ (1,271)$2,522,033$46,739$2,568,772

Lawson, Inc. and its Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended February 28, 2021

2020

Thousands of
U.S. Dollars(Note 1)
2021

¥18,230¥30,320$171,576(12,923)
80,778
16,635
3,213(6,233)(11,436)
79,18318,722
6,121(165)(121,628)
760,264
156,565
30,240(58,664)(931)(6,370)53,013(38,594)(896)
61,293(8,762)(59,953)498,946

29

766

273

10,00021,00051,514
209,725

10,00019,00028,390172,384

94,118
197,647
484,837
1,973,883

227,955

202,704

2,145,459

Millions of Yen
2021
OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes paid
Depreciation and amortization
Impairment of long-lived assets
Loss on disposal of property and store equipment
Gain on sales of investment securities-net
Changes in assets and liabilities:
Increase in accounts receivable(Decrease) in accounts payable
Increase in deposits received
Increase in allowance for retirement benefits toemployees and executive officers and audit andsupervisory board members
Net decrease in call loans for banking business
Net increase in call money for banking business
Other—net
Total adjustments
Net cash provided by operating activities-6-(Continued)

Lawson, Inc. and its Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended February 28, 2021

Millions of Yen
2021
2020
INVESTING ACTIVITIES:
Purchases of property and store equipment
Purchases of software and other intangible
assetsIncrease in long-term loans receivable
Proceeds from collection of long-termloans receivable
Payments for guarantee deposits
Proceeds from collection of guarantee
deposits
Long-term prepaid expenses
Proceeds from sales of investment
securities
Acquisition of associated companies
Other—net
Net cash used in investing activities
FINANCING ACTIVITIES:Net increase (decrease) in short-term loans
payableRepayments of long-term debt
Proceeds from share issuance to noncontrolling shareholders
Cash dividends paid
Proceeds from long-term loan-payable
Payments from changes in ownershipinterests in subsidiaries that do not resultin changes in scope of consolidation
Other—net
Net cash provided by (used in)financing activities

Thousands of
U.S. Dollars(Note 1)
2021

(26,294)(8,471)(33,852)(10,931)(247,473)(79,727)(3,675)
4,917(5,961)
5,736(34,588)
46,278(11,833)
16,011(18,023)
17,836(111,369)
150,692

(381)
7,792

(797)
243

(3,586)73,336(1,733)(6,316)(29,983)(2,246)(1,079)(49,074)(16,311)(59,445)(282,193)

2,470(86,750)

23,247(130,700)(103,319)(1,230,118)

2,622(15,010)(20,263)
50,00024,678(141,271)(3,521)
(24)

(58)

(225)

(140,642)(163,911)(1,323,689)

224

(372)

2,108

NET INCREASE（DECREASE） IN
CASH AND CASH EQUIVALENTS

57,554(10,653)

541,685

CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR

343,583

354,236

3,233,722

CASH AND CASH EQUIVALENTS, END
OF YEAR¥401,137¥343,583$3,775,407

FOREIGN CURRENCY TRANSLATIONADJUSTMENTS ON CASH AND CASH
EQUIVALENTS*See notes to consolidated financial statements.
* Figures are rounded off less than a unit.

-7-(Concluded)

Lawson, Inc. and its Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended February 28, 2021
1.

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act
and its related accounting regulations and in accordance with accounting principles generally accepted in Japan, which are different in certain respects as to application anddisclosure requirements from International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domesticallyin order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2020 financial statements toconform to the classifications used in 2021.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Lawson, Inc. (the “Company”) is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥106.25 to$1, the approximate rate of exchange at February 28, 2021. Such translations should not be construed as representations that the Japanese yen amounts could be converted
into U.S. dollars at that or any other rate.
Mitsubishi Corporation (“Mitsubishi”) owns 50,150 thousand shares of common stock of the Company (including indirect holdings) as of February 28, 2021, which
represents 50.12% of the total voting rights of the Company. Accordingly, Mitsubishi is the parent company.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation—The consolidated financial statements include the accounts of the Company and its 20 (21 in 2020) subsidiaries (collectively, the “Companies”).
Consolidation of the remaining subsidiaries would not have a material effect on the accompanying consolidated financial statements.
Under the control and influence concepts, those entities for which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated,
and those entities over which the Companies have the ability to exercise significant influence are accounted for by the equity method.
Investments in three (three in 2020) associated companies are accounted for by the equity method. Investments in 24 (22 in 2020) unconsolidated subsidiaries andassociated companies are stated at cost. If the equity method of accounting had been applied to the investments in these entities, the effect on the accompanying
consolidated financial statements would not be material.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions
within the Companies has been eliminated.
The excess of the cost of the Company’s investments in consolidated subsidiaries and associated companies over the fair value of the net assets at the dates of acquisition
is being amortized over a period not exceeding 20 years.
-8-

b.

Fiscal Year End of the Consolidated Subsidiaries—The fiscal year end of Chongqing Lawson, Inc.; Shanghai Lawson, Inc.; Dalian Lawson, Inc.; Lawson (China)
Holdings, Inc.; Saha Lawson Co., Ltd., Shanghai Le Song Trading Co., Ltd., Shang Hai Gong Hui Trading Co., Ltd., Zhejiang Lawson, Inc.; Beijing Lawson, Inc.; andBEIJING LUOSONG Co., Ltd. is December 31. In order to prepare the consolidated financial statements, the Company used these companies’ financial statements
prepared as of such fiscal year end, and significant transactions which occur between December 31 and the consolidated fiscal year end are adjusted as required forconsolidation.
The fiscal year end of Lawson Bank, Inc. is March 31. In order to prepare the consolidated financial statements, the Company used this subsidiary’s provisional settlementof accounts as of the Company’s fiscal year end.
The fiscal year end date for the other consolidated subsidiaries is the same as that of the Company.

c.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements— In May 2006, the Accounting Standards Board ofJapan (ASBJ) issued ASBJ Practical Issues Task Force (PITF) No. 18, “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements.” PITF No. 18 prescribes that the accounting policies and procedures applied to a parent company and its subsidiaries for similartransactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial
statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the
United States of America tentatively may be used for the consolidation process, except for the following items that should be adjusted in the consolidation process sothat net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial
gain or loss related to pensions that has been directly recorded in equity; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value
model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.

d.

Unification of Accounting Policies Applied to Foreign Associated Companies Accounted for by Using the Equity Method—In March 2008, the ASBJ issued ASBJ
Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments.” The standard requires adjustments to be made to conform associate's
accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate's financial statements are used inapplying the equity method, unless it is impracticable to determine adjustments. In addition, financial statements prepared by foreign associated companies inaccordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States tentatively may be used in applying
the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a)amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in equity; (c) expensing capitalized
development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant, and equipment and investment properties and incorporation of
the cost model of accounting.

e.

Business Combinations—Business combinations are accounted for using the purchase method. Acquisition-related costs, such as advisory fees or professional fees, areaccounted for as expenses in the periods in which the costs are incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete.
During the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at theacquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected the measurement of
the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date.
The acquirer recognizes any bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired andall of the liabilities assumed have been identified after a review of the procedures used in the purchase price allocation. A parent's ownership interest in a subsidiary mightchange if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interests is adjusted to reflect the change in the parent's-9-

ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration received or
paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus as long as the parent retains control over its subsidiary.
f.

Franchise Agreements and Basis for Recognizing Franchise Commissions—The Company operates principally in a single industry, referred to as the convenience store
business, with its own stores and franchised stores. The Company allows each independent franchisee to operate relatively small-sized convenience stores using specificdesigns and LAWSON brand names, and provides related managerial or technical know-how under a franchise agreement. Under the agreement, all franchised storesare provided with a variety of services and advice on the operation of convenience stores from the Company as the franchisor. In return, such franchised stores are
required to pay continuing franchise commissions to the Company based on certain percentages of the respective franchised store's gross margin. As the franchisor, theCompany accounts for franchise commissions on an accrual basis by reference to the gross margin earned by each franchised store and the applicable commission
percentage. According to the franchise agreement, a franchised store may pay additional guarantee deposits equal to twice the average monthly sales amounts of therespective store and pay a lower commission percentage.
The term of a franchise agreement is effective primarily for 10 years from the commencement date of a new store's operation as a franchised store and may be extended
or renewed upon expiration subject to renegotiation of contract terms between the Company and the franchisee.
The franchise agreement usually provides that the franchised store shall make a cash payment to the Company in the amount of ¥1 million upon commencement. Upon
receipt of such payment, ¥1 million is credited to income of the Company as “Operating revenues—Franchise commissions from franchised stores” for services related tothe opening of the LAWSON store. The remaining amount received by the Company is credited to the “Due to franchised stores” account and then applied to working
capital for purchases of merchandise and supplies for the franchised store.
As part of the contractual obligations of the franchisor under the agreement, the Company generally provides franchisees with furniture, fixtures, and equipment
designed for the LAWSON stores. In some cases, franchisees may also be provided with the land or buildings for the stores. However, the Company does not require thefranchisees to make lease payments related to the stores. Instead, a higher percentage applicable to the gross margin would be used as the basis for determining the
franchise commissions. The portion of franchise commission attributable to property and store equipment leases is not separately accounted for by the Company.

g.

Cash and Cash Equivalents— Cash and cash equivalents include cash on hand, demand deposits, and short-term investments, which mature or become due within threemonths of the date of acquisition and which are readily convertible into cash and are exposed to insignificant risk of changes in value.

h.

Inventories—Substantially all inventories are stated at the lower of cost, determined by the retail method as generally applied in the retail industry or by the grossaverage method, or net selling value.

i.

Marketable and Investment Securities— Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) heldto-maturity debt securities, which are expected to be held to maturity, with the positive intent and ability to hold to maturity are reported at amortized cost and (2)available-for-sale securities, which are not classified as the aforementioned securities, are stated at fair value based on market quotations. Unrealized gains and losses,
net of applicable taxes, are reported in a separate component of equity. The cost of securities sold is determined based on the moving-average method.
Nonmarketable investment securities are stated at cost determined by the moving-average method. For other-than-temporary declines in fair value, nonmarketable
investment securities are reduced to net realizable value by a charge to income.
- 10 -

j.

Property and Store Equipment— Property and store equipment are stated at cost, except for land (see Note 7). Depreciation is computed mainly by the straight-line
method at rates based on the estimated useful lives of the assets. The range of useful lives is principally from 10 to 34 years for buildings and structures and from 5 to 8
years for furniture, fixtures, and equipment.
The useful lives for lease assets are the terms of the respective leases.

k.

Long-Lived Assets— The Companies review their long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset
or asset group, mainly by each store, may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sumof the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss is measured as
the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the assets or the net selling price at disposition.

l.

Software—Software used by the Companies is amortized using the straight-line method based on the estimated useful life (primarily five years).

m. Rights-of-use assets —Rights-of-use assets of the Company’s foreign consolidated subsidiaries that apply International Financial Reporting Standard 16 (IFRS 16)“Leases”. The Company applies the straight-line method using the lease term as the useful life and a residual value of zero.
n.

Trademark Rights—Trademark rights are amortized using the straight-line method based on the estimated useful life (primarily 20 years).

o.

Net Defined Benefit Liability —In calculating the retirement benefit obligation, in order to attribute the estimated amount of retirement benefits in the period up to theend of the current fiscal year, the obligation is based on the benefit formula method.
Prior service cost is amortized starting from the fiscal year incurred mainly on a straight-line basis over a certain period (10 years) within the average remaining service
period of employees at the time of occurrence.
Actuarial differences are mainly amortized from the following fiscal year on a straight-line basis over a certain period (10 years) within the average remaining service
period of employees at the time of occurrence.
Certain consolidated subsidiaries apply the simplified method to estimate the amount required for voluntary resignations at the end of the fiscal year as the retirement
benefit liability in order to calculate net defined benefit liabilities and retirement benefit expenses.

p.

Allowance for Retirement Benefits to Executive Officers and Audit and Supervisory Board Members— The provisions are calculated as liabilities at 100% of theamount that would be required if all executive officers and audit and supervisory board members resigned as of each balance sheet date.

q.

Asset Retirement Obligations—An asset retirement obligation is recoded for a legal obligation imposed either by law or contract that results from the acquisition,
construction, development, and the normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset.
The asset retirement obligation is recognized as the sum of the discounted cash flows required for future asset retirement and is recorded in the period in which the
obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement- 11 -

obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for
an asset retirement obligation, asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset
retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present
value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to thecarrying amount of the liability and the capitalized amount of the related asset retirement cost.
r.

Stock Options— Compensation expenses for employee stock options which were granted on and after May 1, 2006 are recognized based on the fair value at the date of
grant and over the vesting period as consideration for receiving goods or services in accordance with ASBJ Statement No. 8, "Accounting Standard for share-based
payment". Stock options granted to nonemployees are accounted for based on the fair value of either the stock option or the goods or services received. In the
consolidated balance sheet, the stock option is presented as a stock acquisition right and are included as a separate component of equity until exercised.

s.

Income Taxes— The Companies provide for income taxes applicable to all items included in the consolidated statement of income regardless of when such taxes arepayable. Deferred income taxes are recorded to reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes andsuch amounts recognized for tax purposes. These deferred taxes are measured by applying current income tax rates to the temporary differences.
The Company and certain consolidated subsidiaries adopted the consolidated taxation system.

t.

Application of tax effect accounting for transition from consolidated taxation system to group tax sharing system—The Company and certain domestic consolidated
subsidiaries have calculated the amounts of deferred tax assets and deferred tax liabilities in accordance with tax laws in effect before amendment based on thetreatment of Paragraph 3 of “Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax
Sharing System” (ASBJ Practical Issues Task Force No.39, March 31, 2020) instead of applying the provision in Paragraph 44 of “Implementation Guidance on Tax
Effect Accounting” (ASBJ Guidance No.28, February 16, 2018), regarding the transition to group tax sharing system established in “Act for Partial Amendment of the
Income Tax Act, etc.” (Act No.8 of 2020), and items for which the non-consolidated taxation system has been reviewed in the line with the transition to the group tax
sharing system.

u.

Foreign Currency Financial Statements— The balance sheet accounts of associated companies denominated in foreign currencies are translated into Japanese yen at thecurrent exchange rate as of the balance sheet date, except for equity, which is translated at the historical rate. Differences arising from such translation are shown as“Foreign currency translation adjustments” and “Noncontrolling interests” in separate components of equity. Revenue and expense accounts of affiliated companies
denominated in foreign currencies are translated into yen at the current exchange rate.

v.

Per Share Information— Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number ofcommon shares outstanding for the period.
The number of shares used in computing net income per share was 100,065 thousand shares for 2021 and 100,061 thousand shares for 2020.
Diluted net income per share for the years ended February 28, 2021 and February 29, 2020 was computed by using the weighted-average number of common shares
outstanding adjusted to include the potentially dilutive effect of stock options that were outstanding during the year.
Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective years including dividends to be- 12 -

paid after the end of the year.
w.

Accounting Changes and Error Corrections— In December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error
Corrections,”, and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under thisstandard and guidance are as follows:(1) Changes in accounting policies
When a new accounting policy is applied following the revision of an accounting standard, the new policy is applied retrospectively unless the revised accounting
standard includes specific transitional provisions, in which case the entity shall comply with the specific transitional provisions.
The Company’s foreign consolidated subsidiaries have applied International Financial Reporting Standard 16 (IFRS 16), “Leases,”from the fiscal year ended February 28, 2021.IFRS16, “Leases,” requires lessees to recognize most leases on the balance sheet thereby resulting in therecognition of lease assets and liabilities.
The impact of the application of IFRS 16 on the Company’s consolidated financial statements is immaterial.
(2) Changes in presentation
When the presentation of financial statements is changed, prior-period financial statements are reclassified in accordance with the new presentation.
(3) Changes in accounting estimates
A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if thechange affects both the period of the change and future periods.
(4) Corrections of prior-period errors
When an error in prior-period financial statements is discovered, those statements are restated.
x. New Accounting Pronouncements
Accounting Standard for Revenue Recognition
On March 30, 2018, the ASBJ issued ASBJ Statement No. 29, "Accounting Standard for Revenue Recognition," and ASBJ Guidance No. 30, "Implementation Guidanceon Accounting Standard for Revenue Recognition." The core principle of the standard and guidance is that an entity should recognize revenue to depict the transfer ofpromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
An entity should recognize revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contracts with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when or as the entity satisfies a performance obligation
The Company expects to apply the accounting standard and guidance for annual periods beginning on March 1, 2022, and is in the process of measuring the effects ofapplying the accounting standard and guidance in future applicable periods.
- 13 -

Accounting Standard for Fair Value Measurement
On July 4, 2019, the ASBJ issued ASBJ Statement No. 30, "Accounting Standard for Fair Value Measurement" and ASBJ Guidance No. 31, "Implementation Guidanceon Accounting Standard for Fair Value Measurement," and revised related ASBJ Statements and ASBJ Guidance (the "New Accounting Standards"). Under the New
Accounting Standards, nonmarketable available-for-sale equity securities are stated at cost, while under the current accounting standards, nonmarketable available-for-salesecurities are stated at cost. In addition, "Implementation Guidance on Disclosures about Fair Value of Financial Instruments" has been revised to provide notes such as thebreakdown of financial instruments by market value level.
The Company expects to apply the accounting standard and guidance for annual periods beginning on March 1, 2022, and is in the process of measuring the effects ofapplying the accounting standard and guidance in future applicable periods.
.
Accounting Standard for Disclosures about Accounting Estimates
On March 31, 2020, the ASBJ issued ASBJ Statement No. 31, "Accounting Standard for Disclosures about Accounting Estimates”. Under the New AccountingStandards, the objective is to disclose information that contributes to the understanding of financial statement users with regard to the details of the accounting estimates foritems whose amounts recorded in the financial statements for the fiscal year under review were based on accounting estimates and that have a risk of material impact on thefinancial statements for the following fiscal year.
The Company expects to apply the accounting standard for annual periods ending on February 28, 2022, and is in the process of measuring the effects of applying theaccounting standard and guidance in future applicable periods.
y.

Changes in Presentation of Financial Statements(Consolidated Statement of Income)In the “OTHER INCOME (EXPENSES)” section, “Expense due to system failure” was included in “Other” in the previous fiscal year. In order to enhance the clarityof the consolidated financial statements from the current fiscal year, “Expense due to system failure” is now separately presented. To reflect these changes in method ofpresentation, the Consolidated Statement of Income for the previous fiscal year has been reclassified.
As a result, in the “OTHER INCOME (EXPENSES)” section, 632 million yen that was presented as “Other” in the Consolidated Statement of Income for the previous
fiscal year are now presented as “Expense due to system failure.”(Consolidated Statement of Cash Flows)
In the “Cash flow from OPERATING ACTIVITIES” section, “Gain on sale of investment securities” was included in “Other” in the previous fiscal year. In order toenhance the clarity of the consolidated financial statements from the current fiscal year, “Gain on sale of investment securities” is now separately presented. To reflect
these changes in method of presentation, the Consolidated Statement of Cash Flows for the previous fiscal year has been reclassified.
In the “Cash flow from INVESTING ACTIVITIES” section, “Purchase of investment securities” was presented separately in the previous fiscal year. Due to a decline
in financial materiality, “Purchase of investment securities” is now included in “Other-net.” To reflect these changes in method of presentation, the Consolidated
Statement of Cash Flows for the previous fiscal year has been reclassified.
As a result, in the “Cash flow from INVESTING ACTIVITIES” section, (129) million yen that was presented as “Purchase of investment securities” and (950) million
yen that was presented as “Other-net” in the Consolidated Statement of Cash Flows for the previous fiscal year is now presented as (1,079) million yen of “Other-net.”z. Additional Information(Accounting estimates regarding the impact of the spread of the novel coronavirus)
Due to the spread of novel coronavirus (COVID-19), changes have been observed in the sales of some stores of the Lawson Group as well as in trends of customer visits.
- 14 -

In making accounting estimates for impairment of fixed assets, the Group assumes that sales at most stores will recover during the fiscal year ending February 2022, butthat certain effects will remain at some stores even after the fiscal year ending February 2023.
However, there are many uncertainties in the aforementioned assumptions, and any change in the timing when the spread of COVID-19 settles down and its impact on theeconomic environment could affect the Group's financial position, operating results and cash flows in the future.
3.

ACCOUNTS RECEIVABLE—DUE FROM FRANCHISED STORES
Under the franchise agreements, the Company is responsible for providing architectural and design services with respect to the franchised stores’ facilities, for training of the
franchisees’ personnel, and for the centralized processing of invoices from suggested vendors of merchandise and subsequent payments of amounts payable to such vendors.
The EDP system of the Company generates a record of merchandise purchased by each franchised store and accumulates the amounts payable to respective vendors. Under
the franchise agreements, the Company, as a representative for all franchised stores, pays amounts payable to the vendors on the stores’ behalf. When the merchandise isreceived by each franchised store, the Company records the cost of the merchandise in the “Accounts receivable—Due from franchised stores” account since such costs shallbe subsequently recovered from the respective franchised stores.
The “Accounts receivable—Due from franchised stores” account represents net amounts recoverable from the franchised stores.

4.

LEASESAs lessee:
Finance lease transactions that do not transfer ownership.
(1) Components of leased assets
The Companies lease certain store facilities and other assets.
(2) Accounting method for depreciation of leased assets
The accounting method for depreciation of leased assets is as described in “2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (j) Property and Store Equipment.”
As lessor:
Lease receivables as of February 28, 2021 and February 29, 2020, are summarized as follows:

Lease fee receivable
Interest income equivalents
Lease receivables

Thousands of
U.S. Dollars
2021$161,572(5,129)$156,443

Millions of Yen
2021
2020
¥17,167¥18,349(545)(472)¥16,622¥17,877- 15 -

Maturities of lease receivables for finance leases deemed to transfer leased property to the lessee at February 28, 2021 are as follows:Year Ending
February 28 or 29
2022
2023
2024
2025
2026
2027 and thereafter
Total
5.

Thousands of
U.S. Dollars$22,842
21,412
18,786
16,292
12,97969,261$161,572

Millions of Yen¥2,427
2,275
1,996
1,731
1,379
7,359
¥17,167

MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of February 28, 2021 and February 29, 2020 consisted of the following:Thousands of
U.S. Dollars
Millions of Yen
2021
2020
2021
Non-current—Marketable and other¥9,880¥8,306$78,174
equity securities
Non-current—Corporate bonds
61
68
574
Total
¥8,367¥9,948$78,748
The costs and aggregate fair values of marketable and investment securities as of February 28, 2021 and February 29, 2020, were as follows:
Millions of Yen
Unrealized
Unrealized
Fair
February 28, 2021

Cost

Gains

Securities classified as availablefor-sale—
Equity securities¥10,160¥1,882Losses¥32- 16 -

Value¥12,010

Millions of Yen
Unrealized
Unrealized
February 29, 2020

Cost

Securities classified as availablefor-sale—
Equity securities¥6,719February 28, 2021

Cost

Securities classified as availablefor-sale—
Equity securities$95,623

Gains

Losses¥1,648¥27

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses$17,713

Fair
Value

¥8,340

Fair
Value

$301

$113,035

The proceeds, realized gains, and realized losses on the available-for-sale securities which were sold during the years ended February 28, 2021 and February 29, 2020, wereas follows:

February 28, 2021

Proceeds

Millions of Yen
Realized
Gains

Realized
LossesAvailable-for-sale:¥7,792¥6,233Equity securities

February 29, 2020
Available-for-sale:
Equity securities

Proceeds

Millions of Yen
Realized
Gains

¥319

¥165

- 17 -

Realized
Losses¥106

Thousands of U.S. Dollars
February 28, 2021
Available-for-sale:
Equity securities
6.

Realized
Gains

Proceeds$73,336

Realized
Losses$58,664

LONG-LIVED ASSETSThe Companies mainly identify individual stores as the smallest cash generating units. The Companies recognize an impairment loss in cases where the value of long-lived
assets has declined, primarily as a result of continuous operating losses. The carrying amounts of those assets are written down to the recoverable amounts and an impairment
loss is recorded in other expenses in the consolidated statement of income.
The Companies recognized an impairment loss in the following asset categories for the years ended February 28, 2021 and February 29, 2020:

Category
Stores

Other

Related Assets
Buildings andFurniture, fixtures,and equipment
Land
Software

Total

Location
Tokyo
Osaka
OthersMillions of Yen
2021
2020
¥ 2,627¥ 2,533
1,265
1,689
11,846
13,435
76
117
821
948
¥ 16,635¥ 18,722

Thousands of
U.S. Dollars
2021$ 24,725
11,906
111,492
715
7,727$156,565

The above noted assets which incurred impairment losses for the years ended February 28, 2021 and February 29, 2020, consisted of the following:

Buildings
Furniture, fixtures, and equipment
Lease assets
Land
Software
Other
Total

Millions of Yen
2021
2020
¥ 9,604¥ 10,774
563
709
5,500
6,104
76
117
821
948
71
70
¥ 16,635¥ 18,722- 18 -

Thousands of
U.S. Dollars
2021$ 90,391
5,299
51,765
715
7,727
668
$156,565

The recoverable amount of these assets was measured based on net selling price or value in use. The net selling price of land was calculated based on the appraised value by areal estate appraiser or the expected contract price. The value in use was calculated by discounting estimated future cash flows. The discount rates used were mainly 3.0%
and 3.8% for the years ended February 28, 2021 and February 29, 2020, respectively.
7.

LAND REVALUATION
Under the “Law of Land Revaluation,” promulgated on March 31, 1998, and revised on March 31, 1999 and 2001, the Company opted for a one-time revaluation of its ownuse land to a value based on real estate appraisal information as of February 28, 2002.
The resulting land revaluation difference represents unrealized depreciation of land and is stated, net of income taxes, as a component of equity. There was no effect on the
consolidated statement of income. Continuous readjustment is not permitted unless the land value subsequently declines significantly.
As at February 28, 2021, the carrying amount of the land after the above one-time revaluation exceeded the market value by ¥53 million ($499 thousand).

8.

ACCOUNTS PAYABLE—TRADE
The balances of “Accounts payable—trade” represent the amounts payable to vendors for merchandise purchased by the Company-operated stores and franchised stores. The
Company centralizes all merchandise purchasing procedures both for the Company-operated stores and franchised stores and makes collective payments to vendors (see Note3).
“Accounts payable—trade” as of February 28, 2021 and February 29, 2020, were summarized below:

Accounts payable—trade for franchised stores
Accounts payable—trade for the Company-operated
storesTotal
9.

Millions of Yen
2021
2020
¥103,032¥108,546

Thousands of
U.S. Dollars
2021$969,713

24,455¥127,487

230,165$ 1,199,878

20,852¥129,398

ACCOUNTS PAYABLE—DUE TO FRANCHISED STORESThe cost of merchandise supplied to franchised stores is recorded as “Accounts receivable—Due from franchised stores” as described in Note 3.
All franchised stores make remittances of cash proceeds from daily sales to the Company. In certain instances, the remittance from a franchised store exceeds the balance of“Accounts receivable—Due from franchised stores.” In the accompanying consolidated balance sheets, such excess balances are presented as “Accounts payable—Due tofranchised stores.”- 19 -

10. SHORT-TERM LOANS AND LONG-TERM DEBT
Short-term loans at February 28, 2021 and February 29,2020, consisted of notes to banks.
The annual interest rates applicable to the short-term loans were 0.10% and 0.08 % at February 28, 2021 and February 29, 2020, respectively.
Long-term debt at February 28, 2021 and February 29, 2020, consisted of the following:

Millions of Yen
2021
2020
Loans from banks and financial company,
due serially to 2024 with a weighted-averageinterest rate of 0.21% (2021)
Obligations under finance leases
Less current portionLong-term debt, less current portion¥230,000
171,932(145,241 )¥256,691¥310,000
187,311(45,945 )¥451,366

Thousands of
U.S. Dollars
2021$ 2,164,706
1,618,184(1,366,974)$2,415,915

The aggregate annual maturities of long-term debt, excluding finance leases, at February 28, 2021, were as follows:Year Ending
February 28 or 29
2022
2023
2024
2025
2026 and thereafter
Total

Millions of Yen¥100,000
20,00080,00030,000Thousands of
U.S. Dollars$941,177
188,235
752,941
282,353¥230,000$2,164,706

The aggregate annual maturities of finance lease obligations at February 28, 2021, were as follows:Year Ending
February 28 or 29
2022
2023
2024
2025
2026 and thereafter
Total

Millions of Yen¥45,241
37,84531,89324,34432,609¥171,932- 20 -

Thousands of
U.S. Dollars$425,798
356,188
300,170
229,120
306,908$1,618,184

Lease obligations are presented on a net basis by offsetting with long-term loans receivable as the arrangement meets the offsetting requirements.The amounts offset for
the lease obligations due within one year and those due over one year are ¥657 million ($6,184 thousand) and ¥5,198 million ($48,922 thousand), respectively.
The Company and certain consolidated subsidiaries have entered into loan commitment agreements to efficiently finance working capital.
The balances of unused loans at February 28, 2021 and February 29, 2020, consisted of the following:

Total loan commitments
Outstanding balance of used loans
Net amountMillions of Yen
2021
2020
¥220,000¥220,000
14,0703,000¥205,930¥217,000Thousands of
U.S. Dollars
2021$2,070,588
132,424$1,938,164

11. CONTINGENT LIABILITIESAt February 28, 2021 and February 29, 2020, the Company had the following contingent liabilities:

Guarantees and similar items of bank loans

Millions of Yen
2021
2020
¥
110

Thousands of
U.S. Dollars
2021$1,035

12. EMPLOYEES' RETIREMENT BENEFITSFor employees’ retirement benefits, the Company and certain consolidated subsidiaries adopt a funded or unfunded defined benefit-type lump-sum retirement allowance plan
and a defined contribution-type pension plan.
The lump-sum retirement allowance plan (generally unfunded, with some plans being funded in accordance with an employee pension trust) pays a lump sum as a retirement
benefit based on salary and length of service of the employee.
The lump-sum retirement allowance plan employed by some consolidated subsidiaries calculates liabilities related to retirement benefits and retirement benefit expenses by
the simplified method.

- 21 -

Year Ended February 28, 2021
(1) Changes in defined benefit obligations for the year ended February 28, 2021, were as follows:

Balance at beginning of year
Current service cost
Interest cost
Actuarial losses
Benefits paid
Prior service cost
OthersBalance at end of year

Millions of Yen¥21,409
1,950
46
(578)
(1,104)(317)(14)¥21,392

Thousands of U.S.
Dollars$201,496
18,353433(5,440)(10,391)(2,984)(131)$ 201,336(2) Changes in plan assets for the year ended February 28, 2021, were as follows:

Balance at beginning of year

Millions of Yen¥5,579Thousands of U.S.
Dollars$52,508(2)(19)¥5,577$52,489

Actuarial gains
Balance at end of year

(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligations and plan assets were as follows;

Funded defined benefit obligation
Plan assets
Unfunded defined benefit obligation
Net liability arising from defined benefit
obligations

Millions of Yen¥ 19,326(5,577)
13,7492,066¥ 15,815- 22 -

Thousands of U.S.
Dollars$ 181,891(52,489)
129,40219,445$ 148,847

Millions of Yen

Thousands of U.S.
Dollars

Liability for retirement benefits¥15,815$148,847

Net liability arising from defined benefit
obligations¥15,815$148,847(4) Components of net periodic benefit costs for the year ended February 28, 2021, were as follows:

Service cost
Interest cost
Recognized actuarial losses
OthersNet periodic benefit costs

Millions of Yen¥1,95046261
11¥2,268

Thousands of U.S.
Dollars$18,353
433
2,456
104
$21,346(5) Amounts recognized in other comprehensive income (before income tax effect) in respect to defined retirement benefit plans for the year ended February 28, 2021, wereas follows:

Actuarial losses
Total

Millions of Yen¥1,153¥1,153Thousands of U.S.
Dollars$10,852$10,852(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect to defined retirement benefit plans as of February 28, 2021, wereas follows:

Unrecognized prior service cost
Unrecognized actuarial losses
Total

Millions of Yen¥ (317)511¥194- 23 -

Thousands of U.S.
Dollars$(2,984)
4,809$1,825

(7) Plan assets
a. Components of plan assets
Plan assets consisted of the following:
Cash and cash equivalents
Total

100%
100%

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various
components of the plan assets.

(8) Assumptions used for the year ended February 28, 2021, were set forth as follows:
Discount rate
Expected rate of return on plan assets

0.7% (mainly)
0%(9) Contributions to the defined contribution pension plan for the year ended February 28, 2021, were as follows:

Net periodic benefit cost

Millions of Yen¥578- 24 -

Thousands of U.S.
Dollars$5,440Year Ended February 29, 2020
(1) Changes in defined benefit obligations for the year ended February 29, 2020, were as follows:
Millions of Yen¥20,316
1,881
64
332
(1,191)
7¥21,409

Balance at beginning of year
Current service cost
Interest cost
Actuarial losses
Benefits paid
OthersBalance at end of year
(2) Changes in plan assets for the year ended February 29, 2020, were as follows:

Millions of Yen¥5,582(3)¥5,579Balance at beginning of year
Actuarial gains
Balance at end of year

(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligations and plan assets were as follows;
Millions of Yen¥ 19,418(5,579)13,839
1,991

Funded defined benefit obligation
Plan assets
Unfunded defined benefit obligation
Net liability arising from defined benefit
obligations¥ 15,830

Millions of Yen¥15,830

Liability for retirement benefits
Net liability arising from defined benefit
obligations¥15,830- 25 -

(4) Components of net periodic benefit costs for the year ended February 29, 2020, were as follows:
Millions of Yen
Service cost
Interest cost
Recognized actuarial losses
Amortization of prior service cost
Others

¥1,881
64
177
5
(17)
¥2,110Net periodic benefit costs(5) Amounts recognized in other comprehensive income (before income tax effect) in respect to defined retirement benefit plans for the year ended February 29, 2020, wereas follows:
Millions of Yen¥ (157)

Actuarial losses
Total¥(157)(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect to defined retirement benefit plans as of February 29, 2020, wereas follows:
Millions of Yen
Unrecognized prior service cost
Unrecognized actuarial losses
Total¥1,346¥1,346(7) Plan assetsa.Components of plan assets
Plan assets consisted of the following:
Cash and cash equivalents
Total

100%
100%

- 26 -

b.Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various
components of the plan assets.
(8) Assumptions used for the year ended February 29, 2020, were set forth as follows:
Discount rate
Expected rate of return on plan assets

0.3% (mainly)
0%(9) Contributions to the defined contribution pension plan for the year ended February 29, 2020, were as follows:
Millions of Yen¥564

Net periodic benefit cost
13.

ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended February 28, 2021 and February 29, 2020, were as follows:

2021¥35,3422020¥31,118

Thousands of
U.S. Dollars
2021$332,630

908
371

1,414
384

8,546
3,492

(907)
7
35,721(27)(1,525)3,950
35,342(6)(8,536)
66
336,198(254)¥35,694¥35,336$335,944

Millions of Yen
Balance at beginning of year
Additional provisions associated with theacquisition of property, plant, and equipment
Reconciliation associated with passage of time
Reduction associated with settlement of asset
retirement obligations
Additional provisions associated with changes in accounting estimates
Total
Less current portion
Asset retirement obligations, less current portion- 27 -

14.

EQUITYJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies Act that affect financial and accounting
matters are summarized below:a.

Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’meeting. For companies that meet certain criteria such as (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board,and (4) the term of service of the directors being prescribed as one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may
declare dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The
Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available
for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

b.

Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paidin capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may
be reversed without limitation. The Companies Act also provides for common stock, legal reserve, additional paid-in capital, other capital surplus, and retained earnings
to be transferred among the accounts within equity under certain conditions upon resolution of the shareholders.

c.

Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount oftreasury stock purchased cannot exceed the amount available for distribution to the shareholders, which is determined by a specific formula. Under the Companies Act,
stock acquisition rights are presented as a separate component of equity. The Companies Act also provides for companies to purchase both treasury stock acquisitionrights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

- 28 -

15.

STOCK OPTIONSThe Company has stock option plans as an incentive for directors, executive officers, and selected employees.
The stock options outstanding as of February 28, 2021, were as follows:
Number of
Options Granted
22,400 shares

Date of Grant
2005.10.12

9 directors

21,300 shares2006.10.26

7th (a) Stock Option

7 directors

18,000 shares2007.9.5

8th (a) Stock Option

7 directors

26,400 shares2009.1.16

9th Stock Option

7 directors

21,500 shares2010.2.17

10th Stock Option

7 directors

18,900 shares2011.2.25

11th Stock Option

7 directors

27,000 shares2012.2.17

12th Stock Option

7 directors

26,900 shares2013.4.12

13th Stock Option

7 directors

25,400 shares2014.4.10

14th Stock Option

8 directors

12,400 shares2015.4.10

16th Stock Option

8 directors

15,100 shares2016.5.2

17th Stock Option

8 directors

20,100 shares2017.5.1

18th Stock Option

12 executive officers

5,100 shares2017.7.21

19th Stock Option

7 directors
9 executive officers
8 directors
10 executive officers
7 directors
10 executive officers

14,700 shares2018.6.8

17,800 shares2019.6.7

22,800 shares2020.6.12

Stock Option
5th Stock Option

Persons Granted
9 directors

6th (a) Stock Option

20th Stock Option
21st Stock Option- 29 -

ExercisePrice¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )¥1($0.01 )Exercise Period
From October 13, 2005 to May 31, 2025
From October 27, 2006 to May 26, 2026
From September 6, 2007 to August 20, 2027
From January 17, 2009 to December 15, 2028
From February 18, 2010 to February 1, 2030
From February 26, 2011 to February 10, 2031
From February 18, 2012 to February 1, 2032
From April 12, 2013 to March 26, 2033
From April 10, 2014 to March 23, 2034
From April 10, 2015 to March 24, 2035
From May 2, 2016 to April 12, 2036
From May 1, 2017 to April 11, 2037
From July 21, 2017 to July 4, 2037
From June 8, 2018 to May 21, 2038
From June 7, 2019 to May 20, 2039
From June 12, 2020 to May 26, 2040

Stock option activity is as follows:

5th Stock
Option6th (a) Stock
Option7th (a) Stock
Option8th (a) Stock
Option9th Stock
Option10th
Stock
Option11th Stock
Option12th Stock
Option13th Stock
Option

500

400

400

600

500

500

4,800

500

1,000

500

1,000

Year Ended February 29, 2020
Non-vested
February 28, 2019—Outstanding
GrantedCanceled
VestedFebruary 29, 2020—Outstanding

VestedFebruary 28, 2019—Outstanding
VestedExercised

4,300

Canceled
February 29, 2020—Outstanding

500

400

400

600

- 30 -

500

500

500

5th Stock
Option6th (a) Stock
Option7th (a) Stock
Option8th (a) Stock
Option

500

400

400

600

9th Stock
Option10th Stock
Option11th Stock
Option500

500

12th Stock
Option13th Stock
OptionYear Ended February 28, 2021
Non-vested
February 29, 2020—Outstanding
GrantedCanceled
VestedFebruary 28, 2021—Outstanding

VestedFebruary 29, 2020—Outstanding

500

500

1,000

500

500

-

500

VestedExercised
Canceled
February 28, 2021—Outstanding

500

400

400

600

500

500

500

Exercise price

¥1

¥1

¥1

¥1

¥1

¥1

¥1

¥1

¥1

($0.01 )($0.01 )($0.01 )($0.01 )($0.01 )($0.01 )($0.01 )($0.01 )($0.01 )¥6,140($57.79)¥6,140($57.79)¥5,146($48.43)

Average stock price at exercise

Fair value price at grant date

¥3,178¥2,852¥3,477¥2,652¥2,689¥3,339¥5,516($29.91 )($26.84)($32.73 )($24.96 )($25.31 )($31.43)($51.92 )- 31 -

Stock option activity is as follows:
14th Stock
Option16th Stock Option

17th Stock Option

18th Stock Option

19th Stock Option

20th Stock Option

21st Stock
OptionYear Ended February 29, 2020
Non-vested
February 28, 2019—Outstanding
Granted17,800Canceled
Vested

17,800February 29, 2020—Outstanding
VestedFebruary 28, 2019—Outstanding

3,700

4,800

8,200

3,400

14,400

Vested

17,800Exercised
Canceled
February 29, 2020—Outstanding

3,700

4,800

8,200

3,400

14,40017,800Year Ended February 28, 2021
Non-vested
February 29, 2020—Outstanding
22,800GrantedCanceled

22,800

VestedFebruary 28, 2021—Outstanding

VestedFebruary 29, 2020—Outstanding

3,700

4,800

8,200

3,400

14,40017,80022,800

VestedExercised

500

500

500

400

1,000

1,100

3,200

4,300

7,700

3,000

13,40016,700

¥1

¥1

¥1

¥1

¥1

¥1

¥1

($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)($0.01)¥6,251¥6,254¥5,343¥5,363¥4,833¥3,047¥4,506($58.83)($58.86)($50.29)($50.48)($45.49)($28.68)($42.41)

Canceled
February 28, 2021—Outstanding

Exercise price

22,800

Average stock price at exercise

Fair value price at grant date

- 32 -

The assumptions used to measure the fair value of the 21st stock options were as follows:
21st Stock Option
Black-Scholes option
pricing model
22.36%
10 years¥150.0 per share(0.02%)

Estimate method
Volatility of stock price
Estimated remaining outstanding period
Estimated dividend
Risk-free interest rate

16.

INCOME TAXESThe Company and its domestic subsidiaries are subject to a number of different taxes based on income, which in
the aggregate, resulted in a normal statutory tax rate of approximately 30.6% and 30.6% for the years ended
February 28, 2021 and February 29, 2020.
The tax effects of significant temporary differences and tax loss carryforwards, which resulted in deferred tax
assets and liabilities at February 28, 2021 and February 29, 2020, are as follows:

Millions of Yen
2021
2020
Deferred tax assets:
Accrued enterprise taxes¥637
Accrued employees' bonuses
1,573
Excess of depreciation
9,530
Excess of amortization of software
473
Employees' retirement benefits
6,793
Allowance for doubtful accounts
205
Impairment losses
14,949Tax loss carryforwards
6,029
Other
4,345
Total of tax loss carryforwards and temporary differences 44,533
Less valuation allowance for tax loss carryforwards(5,707)Less valuation allowance for temporary differences(3,332)
Total valuation allowance(9,039)Total
35,494
Deferred tax liabilities:
Trademark rights
2,496
Net deferred tax assets¥32,998

Thousands of
U.S. Dollars
2021

¥959
1,514
9,427
616
6,772
198
12,741
6,381
5,907
44,515(5,101)(2,878)(7,980)36,535$5,99514,80589,694
4,452
63,934
1,929
140,696
56,74440,894
419,134(53,713)(31,360)(85,073)
334,062

2,679¥33,856

23,492$310,570

The amount of valuation reserves increased by ¥1,059 million ($9,967 thousand). This primarily reflects anincrease in valuation reserves relating to tax loss carried forward at the consolidated subsidiary.

- 33 -

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates
reflected in the accompanying consolidated statements of income for the years ended February 28,
2021 and February 29, 2020, is as follows:
2021
30.6%
12.0
0.4

2020
30.6%
(5.1)
0.6

Non-taxable permanent differences such as dividend income
Per-capita inhabitant tax
Difference in tax rates of foreign consolidated subsidiaries
Reduction of ending deferred tax balance due to change instatutory tax rate
Amortization of goodwill
Other-net

(0.5)
2.1
2.4
0.3

(0.0)
1.3
2.2
0.5

4.9
0.3

3.9
(0.2)

Actual effective tax rate

52.5 %

33.8%

Normal effective statutory tax rate
Change in valuation allowance
Non-deductible permanent differences such as entertainment expenses

The expiration of tax loss carryforwards, the related valuation allowances and the resulting net deferred tax
assets as of February 28, 2021, were as follows:

February 28, 2021
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax
assets relating
to tax loss
carryforwards

February 28, 2021
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax
assets relating
to tax loss
carryforwards

Due in 1
Year orLess

Due after 1
Yearthrough 2
Years

Millions of Yen
Due after 2 Due after 3 Due after
4 Years
Years
Years
through 3
through 4 through 5
Years
Years
Years

Due
after 5
Years

Total

¥ 1,973

¥ 686

¥ 547

¥ 543

¥ 778

¥ 6,029(1,657)

(686)

(547)

(543)

(772)

(5,707)6323¥ 1,502(1,502)317

Due in 1
Year orLess

Due after 1
Yearthrough 2
Years

Thousands of U.S. Dollars
Due after 2 Due after 3 Due after
Years
Years
4 Years
through 3
through 4 through 5
Years
Years
Years

Due
after 5
Years

Total

$18,569$6,456$5,148$14,136$5,111$7,323$56,743(15,595)(6,456)(5,148)(14,136)(5,111)(7,267)(53,713)

2,974

56

3,030

We believe the tax loss carried forward to be recoverable since taxable income is expected in and after the next
consolidated fiscal year.

- 34 -

17.

SUPPLEMENTAL CASH FLOW INFORMATION(1) Finance lease assets and finance lease obligations regarded as non-cash transactions incurred for the year
ended February 28, 2021, amounted to ¥31,842 million ($299,689 thousand).
(2) Asset retirement obligations regarded as non-cash transactions incurred for the year ended February 28,
2021, amounted to ¥916 million ($8,621 thousand).
IFRS16, “Leases,”has been applied to foreign consolidated subsidiaries. Accordingly, lease transactions enteredinto by such subsidiaries are included in the amounts of assets and liabilities relating to the above finance leasetransactions.

18.

OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended February 28, 2021 and February 29, 2020,
were as follows:

Millions of Yen
2021
2020
Unrealized gain on available-for-sale securities
Gains (losses) arising during the year
Reclassification adjustments to loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments
Adjustments arising during the year
Total
Remeasurements of defined benefit plans
Losses arising during the year
Reclassification adjustments to profit
Amount before income tax effect
Income tax effectTotal
Total other comprehensive income
19.

Thousands of
U.S. Dollars
2021¥6,631(6,220)
411
(126)
285

¥(2,510)(121)(2,631)779(1,852)$62,409(58,541)
3,868(1,185)
2,683

307
307

(543)
(543)

2,889
2,889

892
261
1,153
(353)
800
¥1,392

(335)
178
(157)
70
(87)
¥(2,482)

8,395
2,456
10,851(3,322)
7,529$ 13,101

SEGMENT INFORMATIONIn March 2008, the ASBJ revised ASBJ Statement No. 17, “Accounting Standard for Disclosures about
Segments of an Enterprise and Related Information”, and issued ASBJ Guidance No. 20, “Guidance on
Accounting Standard for Disclosures about Segments of an Enterprise and Related Information.” Under the
standard and guidance, an entity is required to report financial and descriptive information about its reportablesegments. Reportable segments are operating segments or aggregations of operating segments that meet
specified criteria. Operating segments are components of an entity about which separate financial information isavailable and for which such information is evaluated regularly by the chief operating decision-maker in
deciding how to allocate resources and in assessing performance. Generally, segment information is required tobe reported on the same basis as is used internally for evaluating operating segment performance and deciding
how to allocate resources to operating segments.

(a) Description of reportable segments
The Company’s financial information is provided separately by reportable segment and is subject toregular review by the Board of Directors with regard to the allocation of managerial resources andperformance evaluation.
The Group operates primary businesses Domestic Convenience Store Business, Seijo Ishii Business,
Entertainment-related Business, Financial Services Business and Overseas Business while incorporatingother related businesses.
Therefore, the Group has made the Domestic Convenience Store Business, Seijo Ishii Business,
Entertainment-related Business, Financial Services Business and Overseas Business units its main
reportable segments, based on consideration of financial characteristics and the nature of the services
provided.
- 35 -

Regarding the Domestic Convenience Store Business, Lawson, Inc. operates a franchise system as wellas undertaking company-owned stores in Japan as the parent company of LAWSON, NATURALLAWSON, and LAWSON STORE100. Lawson Urbanworks, Inc. undertakes company-owned LAWSON
stores mainly in Tokyo and Chiba prefectures. Lawson Store100, Inc. undertakes company-owned
LAWSON STORE100 stores. SCI, Inc., a functional subsidiary which comprehensively manages theprocess from procurement to sale, aims to improve the efficiency of the entire process.
Regarding the Seijo Ishii Business, SEIJO ISHII CO., LTD. operates SEIJO ISHII supermarkets.
Regarding the Entertainment-related Business, Lawson Entertainment, Inc. conducts the management andsales of concert tickets at LAWSON stores and others, music and video software products at HMV storesand others. In addition, United Cinemas Co., Ltd. operates multiplex movie theatres.
Regarding the Financial Services Business, Lawson Bank, Inc. carries out a banking business.
Regarding the Overseas Business, the Group’s operating companies opened LAWSON stores in the
People’s Republic of China and Thailand.
(b) Changes in reportable segments
Due to its increased importance, the Overseas Business, which was included in Others, has been recorded
as a single reporting segment from the current fiscal year. As a result, segment information for the previous
fiscal year was reclassified to reflect the change and presented in “(d) Information about sales, profit (loss),
assets, and other items.”(c) Methods of measurement for the amounts of sales, profit , assets, and other items for each reportablesegment
The segment accounting policies are the same as those described in “Accounting Policies for the
Preparation of Consolidated Financial Statements.” Segment profit is based on operating income.
Intersegment sales or transfers are based on market values.
(d) Information about sales, profit (loss), assets, and other items is as follows:- 36 -

Millions of Yen
2021
Reportable Segments
Domestic
Entertainme Financial
Seijo Ishii
Convenience
nt-Related Services
Business
Store BusinessBusiness Business
Sales:
Sales to external customers
Intersegment sales ortransfers¥416,436¥103,037

6,065¥56,593¥28,576

1,317

2,998

Overseas
Business¥61,357

Other

Total

Reconciliations¥3¥666,002

207

10,587¥(10,587)¥676,589¥(10,587)

Consolidated¥666,002

Total¥422,501¥103,037¥57,910¥31,574¥61,357¥210

Segment profit (loss)
Segment assets
Other:
Depreciation
Amortization of goodwill
Investments in associatedcompanies
Increase in property, plant,
and equipment andintangible assets¥28,740
881,172¥10,329
73,382¥(298)
53,786¥1,753450,974¥809
56,703¥(456)¥40,877
506 1,516,526¥40,877¥(151,096) 1,365,430

57,713
2,179

1,976
1,437

2,301
502

6,974

7,642
54

76,606
4,172

76,606
4,172

4,942

4,942

34,76534,765

4,942

25,827

1,543

886

2,456

- 37 -

4,053¥666,002

Millions of Yen
2020
Reportable Segments
Domestic
Entertainme Financial
Seijo Ishii
Convenience
nt-Related Services
Business
Store BusinessBusiness Business
Sales:
Sales to external customers
Intersegment sales ortransfers¥465,333¥93,120

6,219¥83,961¥31,646

1,386

2,443

Overseas
Business¥56,169

Other

Total

Reconciliations¥8¥730,237

1,098

11,146¥(11,146)¥(11,146)

Consolidated¥730,237

Total¥471,552¥93,120¥85,347¥34,089¥56,169¥1,106¥741,383

Segment profit (loss)
Segment assets
Other:
Depreciation
Amortization of goodwill
Investments in associatedcompanies
Increase in property, plant,
and equipment andintangible assets¥47,122908,974¥8,34871,903¥5,31369,737¥3,089395,854¥(1,006)
42,113¥77385¥62,943
1,488,966¥62,943¥ (131,233) 1,357,733

57,755
2,444

1,888
1,437

2,365
502

6,401

6,334
57

0

74,7434,440

74,743
4,440

5,100

5,100

44,78344,783

5,100

33,165

1,045

2,772

2,587

- 38 -

5,214¥730,237

Thousands of U.S. Dollars
2021
Reportable Segments
Domestic
Entertainme Financial
Seijo Ishii
Conveniencent- Related Services
Business
Store BusinessBusiness Business
Sales:
Sales to external customers
Intersegment sales ortransfers
Total$3,919,398$969,760 $532,640$268,951

57,082

12,39528,216$3,976,480$969,760$545,035 $297,167

Overseas
Business$577,478$577,478

Other

Total

$27

$6,268,254

1,949

99,642$1,976$6,367,896

Reconciliations

Consolidated$6,268,254$(99,642)$(99,642) $6,268,254

Segment profit (loss)$270,494$97,214$(2,805) $16,499$7,614$(4,291)$384,725$384,725
Segment assets
8,293,384
690,654506,221 4,244,461
533,675
4,791 14,273,186 $(1,422,080) 12,851,106
Other:
Depreciation
543,181
18,59821,656
65,63871,925
720,998
720,998
Amortization of goodwill
20,50813,525
4,725
508
39,26639,266
Investments in associated46,51346,51346,513companies
Increase in property, plant,
243,078
14,522
8,339
23,11538,146327,200
327,200
and equipment andintangible assets
Notes: 1. The business segments within the “Other” category that do not fall under the main reportable segments, include Consulting Business.
2. Adjustments to segment assets are due to the elimination of intra-segment transactions.
3. Segment profit (loss) corresponds to consolidated operating income.

- 39 -

(e) Information regarding loss on impairment of long-lived assets of reportable segments
Millions of Yen
2021
Reportable Segments
Domestic
Convenience
Store Business
Loss onimpairmentof longlived assets

Seijo Ishii
Business¥16,206¥197

Entertainme
nt- Related
Business

Financial
Services
Business¥143

Overseas
Business

Other

¥89

Total

Reconciliations¥16,635

Consolidated¥16,635

Millions of Yen
2020
Domestic
Convenience
Store Business
Loss onimpairment oflong-lived
assets¥18,359

Reportable Segments
Entertainment- Financial
Seijo Ishii
RelatedServices
Business
Business
Business¥17¥73

Overseas
Business

Other

¥273

Total

Reconciliations¥18,722

Consolidated¥18,722

Thousands of U.S. Dollars
2021
Reportable Segments
Domestic
Convenience
Store Business
Loss onimpairmentof longlived assets$152,527

Seijo Ishii
Business$1,854Entertainme
nt- Related
Business

Financial
Services
Business$1,346

Overseas
Business$838- 40 -

Other

Total

$156,565

Reconciliations

Consolidated$156,565

(f) Information regarding the carrying amount of goodwill by reportable segments
Millions of Yen
2021
Reportable Segments

Goodwill at
February 28,
2021

Domestic
Convenience
Store Business

Seijo Ishii
Business

Entertainme
nt- Related
Business¥11,475¥19,522¥6,683Financial
Services
Business

Overseas
Business

Other

¥535

Total

Reconciliations¥38,215

Consolidated¥38,215

Millions of Yen
2020
Reportable Segments

Goodwill at
February 29,
2020

Domestic
Convenience
Store Business

Seijo Ishii
Business

Entertainme
nt- Related
Business¥13,654¥20,958¥7,185

Financial
Services
Business

Overseas
Business

Other

¥584

Total

Reconciliations¥42,382

Consolidated¥42,382

Thousands of U.S. Dollars
2021
Reportable Segments

Goodwill at
February 28,
2021

Domestic
Convenience
Store Business

Seijo Ishii
Business

Entertainme
nt- Related
Business$108,001$183,736$62,899

Financial
Services
Business

Overseas
Business$5,035- 41 -

Other

Total

$359,671

Reconciliations

Consolidated$359,671

20.

RELATED PARTY TRANSACTIONS
Balances and transactions of the Company with a subsidiary of Mitsubishi Corporation as of and for the years
ended February 28, 2021 and February 29, 2020, were as follows:(1) Transactions between the Company and related parties

Millions of Yen
2021
2020
Mitsubishi Corporation
Acceptance of debt guarantees
Payment of guarantee fees
Mitsubishi Shokuhin Co., Ltd.
Accounts payable—trade
Purchases
Mitsubishi Corporation Financial & Management Services(Japan) Ltd.
Short-term loans payable
Accrued interest

Thousands of
U.S. Dollars
2021¥14,0700¥3,0000$132,424
0¥54,454694,640¥61,836
773,366$512,508
6,537,788¥14,0700¥3,0001$132,424
0

Purchase prices and other conditions are determined on an arm’s-length basis.
(2) Transactions between subsidiaries and related parties

Millions of Yen
2021
2020
Mitsubishi Corporation
Acceptance of debt guarantees
Payment of guarantee fees
Accrued expenses
Mitsubishi Corporation Financial & Management Services(Japan) Ltd.
Short-term loans payable
Accrued interest
Long-term loans payable
Accrued interest
Borrowing interest
Mitsubishi Shokuhin Co., Ltd.:
Accounts receivable－Other
Sales of processed food, etc.

Thousands of
U.S. Dollars
2021¥50,000
9
1¥130,000162$470,58885
9¥50,000
221
1¥130,00062$470,588
2,080
9¥25,186
285,187¥28,872
331,938$237,045
2,684,113

Sales prices and other conditions are determined on an arm’s-length basis.
21.

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Policy for Financial Instruments
The Company primarily uses short-term deposits, etc., to manage its funds and raises funds as necessary
through borrowings from financial institutions and leasing, according to the financing plan.
(2) Nature, Extent of Risk, and Risk Management System for Financial Instruments
Trade receivables, such as accounts receivable due from franchised stores, accounts receivable-other, andlease receivables are exposed to credit risk from business counterparties.
Long-term loans receivable (mainly construction assistance fund receivables) and lease deposits are
exposed to credit risks of borrowers and landlords. With regard to this risk, the Company manages credit
on a daily basis at the relevant division and aims to identify and minimize collection concerns in the earlystages arising from the deterioration in the financial condition of those borrowers and landlords.
Investment securities are primarily shares of companies with which the Company has business- 42 -

relationships and listed shares which are exposed to the risk of market price fluctuation. With regard to thisrisk, the Company monitors the financial conditions of business counterparties on a regular basis.
For trade payables, most of the accounts payable-trade, accounts payable due to franchised stores, accounts
payable-other, and deposits received as a result of bill settlement services have payment due dates within
one month, while most deposits received held as a result of ticket sales transactions have payment due
dates within six months.
Short-term loans payable are mainly for the purpose of procuring working capital, and are due within 1
year.
Long-term loans from banks and financial company payable are mainly for the purpose of managing abanking business and funding M&A, and are due within five years.
The primary purpose of lease obligations related to finance lease transactions is securing the funds requiredfor capital investments, and the maximum redemption period is 15 years after the consolidated balance
sheet date.
With regard to the liquidity risk associated with fundraising (i.e., risk that payments cannot be executed on
the payment due dates), the Company prepares and updates financial plans on a timely basis and manages
liquidity risk by measures including maintaining adequate liquidity on hand.
(3) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is notavailable, other rational valuation techniques are used instead. Since multiple factors are considered in theestimation of fair value, the results of the estimation might differ if other valuation techniques were used.
Millions of Yen
February 28, 2021
Cash and cash equivalents
Time deposits
Due from franchised stores
Lease receivables
Accounts receivable
Long-term loans receivable
Investment securities
Lease deposits

Carrying
Amount¥401,137
1,447
46,386
16,622
161,048
46,39912,734
102,520

Fair Value¥401,137
1,447
46,386
15,726
161,048
43,012
12,734
100,857

Total¥788,293¥782,347

Accounts payable
Short-term loans
Deposits received
Long-term debt (including current portionof long-term debt)¥218,285
42,320246,111¥218,285
42,320246,111

401,932

397,143¥ (4,789)

Total¥908,648¥903,859¥ (4,789)- 43 -

Unrealized
Gain/Loss¥ (896)(3,387)(1,662)¥ (5,945)

Millions of Yen
February 29, 2020
Cash and cash equivalents
Time deposits
Due from franchised stores
Lease receivables
Accounts receivable
Long-term loans receivable
Investment securities
Lease deposits

Carrying
Amount¥343,583
447,367
17,877
159,097
47,461
9,496
106,778

Fair Value¥343,583
447,367
17,598159,097
46,6089,214
108,386

Unrealized
Gain/Loss

Total¥731,663¥731,856

Accounts payable
Short-term loans
Deposits received
Long-term debt (including current portionof long-term debt)¥224,246
39,850193,097¥224,246
39,850193,097497,311492,060¥ (5,251)

Total¥954,503¥949,253¥ (5,251)¥ (279)
(853)
(283)
1,608
¥193

February 28, 2021
Cash and cash equivalents
Time deposits
Due from franchised stores
Lease receivables
Accounts receivable
Long-term loans receivable
Investment securities
Lease deposits

Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value
Gain/Loss$3,775,407$3,775,407
13,61913,619436,574
436,574
156,443
148,009$(8,433)
1,515,746
1,515,746
436,696404,820(31,878)
119,849
119,849
964,894
949,242(15,642)

Total$7,419,228$7,363,266$(55,953)

Accounts payable
Short-term loans
Deposits received
Long-term debt (including current portionof long-term debt)$2,054,447
398,306
2,316,339
3,782,889$2,054,447
398,306
2,316,339
3,737,816$(45,073)

Total$8,551,981$8,506,908$(45,073)

As long-term loans receivable and lease obligations satisfy the offsetting requirements, long-term loans
receivable are offset against lease obligations and the net amount is shown in the consolidated balance
sheets. The offset amount is 5,856 million yen.
Cash and deposits, Due from franchised stores and accounts receivables
The carrying values of cash and deposits,Due from franchised stores and accounts receivable (including
allowance for doubtful accounts) approximate fair value because of their short maturities.
Lease receivables
The fair values of lease receivables are determined by discounting future cash flows, which reflectcollectability, using the yield rate of government bonds for the remaining period.

- 44 -

Long-term loans receivable
The fair values of long-term loans receivable (including allowance for doubtful accounts) are determinedby discounting the cash flows related to the obligations at the Companies’ assumed corporate discount rate.
Investment securities
The fair values of investment securities are measured at the quoted market price on the stock exchange forthe equity instruments, and at the quoted price obtained from the financial institution for certain debt
instruments.
Lease deposits
The fair values of lease deposits (including allowance for doubtful accounts) are determined by discounting
future cash flows, which reflect the collectability, using the yield rate of government bonds for theremaining period.
Accounts payable and deposits received
The carrying values of accounts payable and deposits received approximate fair value because of their shortmaturities.
Short-term loans
These instruments are stated at their carrying values. Because they are determined using floating interest
rates that reflect market rates in a short-time and have short maturities, their carrying values areapproximately the same as their fair values.
Long-term debt (including current portion of long-term debt)
The fair values of long-term debt are determined by discounting the cash flows related to the obligations at
the expected rate of interest to be applied for similar lease transactions.
(4) Financial Instruments Whose Fair Value Cannot Be Reliably Determined
Carrying AmountThousands ofMillions of Yen
U.S. Dollars
2021
2020
2021
Investments in equity instruments that do nothave a quoted market price in an active market
Investments in unconsolidated subsidiaries andaffiliated companies
Others- 45 -¥179¥309$1,68520,441
1,179

19,362
1,299

192,386
11,095(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen
2021
Due after 1
Due afterYear
5 Years
through 5
throughYears
10 Years

Due in 1
Year orLess
Cash and deposits
Time deposits
Due from franchised stores
Lease receivables
Accounts receivable
Long-term loans receivable
Lease deposits¥401,137

Total¥621,570

Cash and deposits
Time deposits
Due from franchised stores
Lease receivables
Accounts receivable
Long-term loans receivable
Lease deposits
Total

Due
after 10
Years

1,447

46,386
2,291
161,063676
8,570

Due in1 Yearor Less¥343,583¥7,021¥7,31016,52424,29816,87025,027¥12,40745,135¥47,843¥49,207¥57,542Millions of Yen
2020
Due after
Due after
1 Year
5 Years
throughthrough
10 Years
5 Years

Due after
10 Years

4

47,367
2,463
159,122356
8,679¥561,575

Due in 1
Year orLess¥7,549¥7,86417,75324,837

15,481
26,743¥13,932
46,935¥50,139¥50,088¥60,867

Thousands of U.S. Dollars
2021
Due after 1
Due afterYear
5 Years
through 5
throughYears
10 Years

Due after
10 Years

Cash and deposits
Time deposits
Due from franchised stores
Lease receivables
Accounts receivable
Long-term loans receivable
Lease deposits$3,775,407
13,619436,574
21,563
1,515,887
6,362
80,659$66,080$68,800

155,520
228,687

158,777
235,548$116,772
424,801

Total$5,850,071$450,287$463,125$541,572- 46 -

22.

NET INCOME PER SHARE
A reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended
February 28, 2021 and February 29, 2020, is as follows:Year Ended February 28, 2021
Basic EPS—Net income available
to common shareholders
Effect of dilutive securities—
Stock options
Diluted EPS—Net income forcomputation

Year Ended February 29, 2020
Basic EPS—Net income available
to common shareholders
Effect of dilutive securities—
Stock options
Diluted EPS—Net income forcomputation
23．

Millionsof YenNet
Income¥8,690

Thousandsof Shares
Weighted-Average
Shares100,065

Yen

U.S. Dollars
EPS¥ 86.84$ 0.82¥ 86.78$ 0.82

69

¥

8,690

100,135

Millionsof YenNet
IncomeThousandsof Shares
Weighted-Average
Shares

EPS¥ 20,108

100,061¥ 200.95

Yen

58¥ 20,108

100,119¥ 200.84

SUBSEQUENT EVENT
Appropriation of Retained Earnings
The following appropriation of retained earnings was approved at the general shareholders’ meeting held on
May 25, 2021:

Millions of Yen¥ 7,505

Cash dividends, ¥75.0 ($0.71) per share- 47 -

Thousands of
U.S. Dollars$70,635