Financial Results
for the six months ended June 30, 2018 — Consolidated(Based on IFRS)
August 3, 2018

Company name

Sapporo Holdings Limited

Security code
Listed on
URL

2501
Tokyo Stock Exchange (First Section); Sapporo Securities Exchange
http://www.sapporoholdings.jp/english/

Representative
Contact

Masaki Oga, President and Representative Director
Toshihiko Umezato, Director of the Corporate Communications Department

Telephone
Scheduled dates:+81-3-5423-7407

Filing of quarterly financial reportAugust 13, 2018

Commencement of dividend payments-

Supplementary information to the quarterly earnings results

Available

Quarterly earnings results briefing heldYes(mainly targeted at institutional
investors and analysts)

1. Consolidated Financial Results for the six months ended June 30, 2018
(January 1 – June 30, 2018)(Amounts in million yen rounded to the nearest million yen)

(1) Operating Results(Percentage figures represent year-over-year changes)
Revenue

Operating profit

Profit before tax

million yen%

million yen

Six months ended
June 30, 2018

241,740(3.6)(3,043)_(3,641)_(2,909)_Six months ended
June 30, 2017

250,683

_

1,161

_

680

_

(440)

_

Profit attribute tomillion yen

Total comprehensive

owners of parent
million yen

%

%

%

Profitmillion yen

Basic earnings

Diluted earnings

per shareper shareyen

incomemillion yen%

Yen

Six months ended
June 30, 2018

(2,516)_(10,966)_(32.30)(32.30)Six months ended
June 30, 2017

(188)

_

3,299

_

(2.41)(2.41)

1%

(2) Financial Position
Total assets

Total equity

Equity attributableto owners ofparentEquity ratio
attributable toowners of parent

million yen

million yen

million yen%

Six months ended
June 30, 2018

643,937

161,796

158,653

24.6

December 31, 2017664,731

175,710172,055

25.9

2. Dividends
Dividend per share
Record date or

End Q1End Q2End Q3Year-end

Full year

yen

yen

yen

yen

yen

—

40.00

40.00

—

40.00

40.00

periodYear ended
December 31, 2017

—

0.00

Year ended
December 31, 2018

—

0.00

Year ending
December 31, 2018
(forecast)

Note: Changes were made to dividends forecasts in the six months ended June 30, 2018: None

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2018
(January 1 – December 31, 2018)(Percentage figures represent year-over-year changes)
Revenuemillion yen

Operating profit%

million yen%

Profit before tax

million yen%

Profit attribute to

Basic earnings

owners of parent

per share

million yen

16,10025.7
15,10030.9
537,800
0.2
9,200
Year ending
December 31,
2018
Note: Changes were made to earnings forecasts in the Six months ended June 30, 2018: Yes

2

%

Yen

28.0

118.11

4. Other(1) Changes to scope of consolidation: None
(2) Changes in accounting policy, changes in accounting estimates, and retrospective restatement
1) Changes in accounting policies required by IFRS: None
2) Changes other than 1) above: None
3) Changes in accounting estimates: None
(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):June 30, 2018: 78,794,298 shares
December 31, 2017: 78,794,298 shares
2) Number of shares held in treasury at end of period:
June 30, 2018: 901,816 shares
December 31, 2017: 901,792 shares
3) Average number of outstanding share during the period:
Six months ended June 30, 2018: 77,892,030 shares
Six months ended June 30, 2017: 77,894,480 shares*Quarterly review status
The quarterly financial results are not subject to quarterly reviews pursuant to the Financial
Instruments and Exchange Act.
Appropriate Use of Earnings Forecasts and Other Important Information
This document contains projections and other forward-looking statements based on information
available to the Company as of the date of this document. Actual results may differ from thoseexpressed or implied by forward-looking statements due to various factors.

3

1. Analysis of Operating Results and Financial Condition
The Sapporo Group has applied the International Financial Reporting Standards (IFRS) to its
consolidated accounts from the first half of 2018. For the purpose of comparison, financial data for the
first half and entire fiscal 2017 are also presented on the IFRS basis.
(1) Operating Results
In the first half of 2018 (January 1 – June 30, 2018), the Japanese economy remained in a moderate
recovery trend, underscored by firm consumer spending. However, the outlook for the global economy
remained clouded with uncertainties, including concerns about trade frictions among major countries.
In this economic environment, the Sapporo Group’s first-half consolidated revenue was down year on
year. The Japanese Alcoholic Beverages business posted strong sales of its Sapporo Draft Beer Black
Label in cans and RTD offerings, and the International Business’ Canadian subsidiary SLEEMAN
BREWERIES also put up strong sales figures. However, the Japanese Alcoholic Beverages business
saw sales of its happoshu and new-genre beers fall below the previous year’s levels. In addition, sales ofsoft drinks in Japan handled by the Food & Soft Drinks business were down year on year.
With all segments except for the Real Estate business reporting year-on-year revenue declines, theGroup’s profits declined in the first half of the fiscal year.
First-half 2018 consolidated revenue totaled ¥241.7 billion (down ¥8.9 billion or 4% year on year). The
Group posted a first-half operating loss of ¥3.0 billion (compared with a ¥1.2 billion profit a year earlier),
and the net loss attributable to owners of the parent came to ¥2.5 billion (compared with a net loss of¥0.2 billion a year earlier).
Results by segment are outlined below. From the consolidated financial statements for the first half of2018, the export business of Sapporo International Inc., which was included in the International Businesssegment, has been transferred to Sapporo Breweries Ltd., which is included in the Japanese Alcoholic
Beverages segment.
To enable year-over-year comparisons in this document, figures for the year-earlier period have beenadjusted to reflect the new segmentation.
Seasonal Factors
The Group’s operating results exhibit substantial seasonal variation in demand for the products andservices offered by the Japanese Alcoholic Beverages, International Business, Food & Soft Drinks, andRestaurants businesses. As a result, revenue in the first half tends to be lower than revenues in theother three quarters.
Japanese Alcoholic Beverages
We estimate that total domestic demand for beer and beer-type beverages in the first half of 2018 fell
3% from the level seen in the first half of 2017.
Under such market conditions, the Japanese Alcoholic Beverage business continued its efforts torealize management’s vision of “Seek to be No.1 by accumulating one-of-a-kind products” and achieve
further growth by constantly providing customers with a unique value proposal and by investing
aggressively in the beer business in line with the business policy of “Continuation of strengthening of thebeer business."Among beer products, sales of Sapporo Draft Beer Black Label, especially the canned version, werestrong throughout the first half of the fiscal year. In the happoshu and new-genre beer categories, welaunched LEVEL 9 Zeitaku Strong, a high alcoholic-content new-genre beer. However, due toincreasingly intense market competition and other factors, overall shipments of our beer and beer-type
beverages fell 9% from the level seen in the first half of 2017.
In the RTD*1 category, Rirakusu, a strong cocktail-like beverage launched in April received a favorable
response from consumers. In addition, we continued to see steady sales growth for the core RTD
collaboration products, such as Otoko Ume Sour, Ai no Skal White Sour, and Kireto Lemon Sour. As aresult, the RTD category achieved year-on-year sales growth.
4In the wine category, we continued to strengthen marketing of domestic and imported fine wines*2,
including the imported wine Penfolds, Taittinger champagne, and our domestic Grande Polaire wines.
However, weak sales of our everyday wines*2 led to a year-on-year decline in sales for the wine category
as a whole.
Our spirits business achieved year-on-year sales growth, led by strong sales of products from major
overseas brands, such as Bacardi and Dewars.
Our Japanese liquor business continued to enjoy strong sales of Imo Shochu Kokuimo, Japan’s No.1
selling*3 blended imo shochu. Overall category sales were in line with those in the first half of 2017.
Overall, the Japanese Alcoholic Beverages business’ first-half revenue came to ¥113.4 billion, ¥5.8
billion or 5% less than a year earlier. The segment posted an operating loss of ¥2.3 billion, comparedwith a profit of ¥0.6 billion one year earlier.
*1) RTD, or ready-to-drink, beverages are already-mixed, low-alcohol content cocktail-like beverages
that can be consumed as is immediately after opening.
*2) Fine wines are wines priced in the mid- to high-price range of ¥1,500 or more per bottle, while
everyday wines are those with a low price of less than ¥1,500 per bottle.
*3) Based on Intage SRI market research on combined blended imo shochu sales in the supermarket,
convenience store, and direct sales channels from November 2016 to May 2018.
International BusinessWe estimate that total demand in the North American beer market in the first half of 2018 was below theprevious-year level in the United States but was up slightly year on year in Canada. In Asian countries,
demand is being affected by slower economic growth and governments’ increasingly assessing newtaxes on a wider range of consumer goods.
In this environment, our International Business continued its efforts to strengthen brand recognition
primarily in the premium beer markets in North America and Southeast Asia.
Our Canadian subsidiary SLEEMAN BREWERIES continued to invest in the marketing of its core
premium brands, which enabled it to increase its overall beer sales volume (excluding Sapporo brandbeer) year on year. In the U.S. beer market, Sapporo USA’s shipments of Sapporo brand beers declined
year on year despite the subsidiary’s continued efforts to expand its customer base among the general
population as well as to Asian Americans. Since the acquisition of Anchor Brewing Company in
September 2017, Sapporo USA has been working to strengthen sales synergies with the new groupcompany, especially on the U.S. west coast.
In the U.S. soft drinks market, County Pure Foods and Silver Springs Citrus both saw their revenues fallin an increasingly difficult management environment. During the second quarter of the fiscal year, we
successfully completed the management integration of these two U.S. subsidiaries and think they are
now ready to aim for improved earnings.
In Southeast Asia, Sapporo Vietnam managed to increase its beer shipments over the previous year's
level despite the January hike in the country’s liquor tax. We are continuing to make structural reforms at
the Vietnam business.
As a result, the International Business posted revenue of ¥37.8 billion, down ¥0.1 billion or 0%. The
business posted an operating loss of ¥0.2 billion, compared with a profit of ¥0.5 billion a year earlier.

5

Food & Soft Drinks
We estimate that overall demand for soft drinks in Japan increased 2% year on year in the first half of
2018.
In this environment, the Food & Soft Drinks business continued to strengthen its brand lineups andprovide customers with value unique to the Sapporo Group.
In the first half of the fiscal year, the domestic soft drinks business launched a new version of its core
Kireto Sparkling brand and stepped up marketing of the product. The JELEETS series of dessert drinksthat was introduced in March enjoyed steady sales growth, with cumulative unit shipments surpassing
the 10 million bottles mark in June. Core lemon-based drinks, sugar-free teas made from domestic tea
leaves, and beverages with a food-like texture all enjoyed steady sales. However, sales of coffee drinks
declined in a weak market for canned coffees. Overall, shipments of soft drinks in Japan fell below theprevious year’s level.
As part of its plans to more aggressively expand the instant soup business, the domestic foodbusiness decided to set up equipment for producing cup-based instant soups and granulation equipment
for processing powdered soup granulated materials at Sapporo Breweries’ Sendai plant. In addition,
sales of cold canned soups expanded steadily as the business strengthened sales promotions for springand summer season products. Shipments of lemon-based food products expanded a sharp 17% year on
year, with the growth driven by strong sales of our core Pokka Lemon 100 and the February renewal ofLemon kajū o hakkō sasete tsukutta lemon no su, a lemon vinegar made from fermented lemon juice.
Seeking to expand the market for industrial-use lemon products, the Food and Soft Drinks businessjoined with Guranavi, Inc., in planning and staging the “Lemon Sour Grand Prix 2018 in Kanto.” The soybeans and chilled products business stepped up its efforts to build larger customer bases for its new
SOYBIO Soymilk Yogurt and Almond Breeze, the world’s leading brand of almond milk.
At the domestic restaurants business, Pokka Create, the POKKA SAPPORO subsidiary that operates
the Café de Crié coffee shop chain, continued its efforts to boost sales by introducing new menus withseasonal and trendy dishes, but existing store sales fell below the previous year’s level.
Our overseas soft drinks business maintained its top share* in Singapore’s tea drinks market,
including its dominant 70% share of the green tea market. However, exports to other countries in theregion fell slightly as new tax systems introduced in some countries since last year have depressed
consumer spending. In Indonesia, PT. POKKA DIMA INTERNATIONAL continued its efforts to expand
sales of core products.
As a result of above, the Food & Soft Drinks segment recorded revenue of ¥59.6 billion in the first halfof the fiscal year, ¥3.1 billion or 5% less than in the first half of 2017. The segment’s operating loss was¥1.3 billion, compared with a ¥0.3 billion loss a year earlier.
* Based on data from Nielsen Singapore MarketTrack December 2017 (Copyright 2017, The Nielsen
Company)
Restaurants
Japan’s restaurant industry continued to enjoy year-on-year growth in revenues in the first half of 2018,
but the industry also remains faced with a severe operating environment characterized by labor
shortages and by increases in labor costs and food material procurement prices.
In this environment, our Restaurants business continued to pursue the fulfillment of its philosophy of“Enhancing the Joy of Living” through constant efforts to deliver safe and sound food and service tocustomers while also striving to create restaurants that “deliver 100% satisfaction to customers.”
New store openings in Japan included the March opening in Fukuoka's Hakata district of the first
Yebisu Bar outlet in Kyushu, followed by the opening in May of a Ginza Lion Beer Garden in Chiba
Prefecture’s Kashiwa City. The new outlets have won rave reviews from local customers and both are
putting up solid numbers. We plan to continue expanding our presence throughout Japan by opening
new outlets in regional cities as well as the Tokyo metropolitan area. We also continue to renovate
existing outlets and change formats as needed. This April we re-opened the fully renovated Ginza Lion
outlet in Tokyo’s Aoyama district. During the same month, we opened Sobaemon, the first outlet of a newJapanese restaurant format, located in Tokyo’s Osaki area. Meanwhile, we closed two unprofitable6

outlets, keeping the total number of restaurants operating in Japan as of end-June at 195.
Our restaurant business in Singapore continues to promote the spread of Japan’s beer hall culture.
However, we closed one unprofitable store during the first half, reducing the total number of outlets in
Singapore to 12 stores as of end-June.
Overall, our Restaurants business’ first-half revenue came to ¥13.2 billion, down ¥0.4 billion or 3%
year on year. The segment posted an operating loss of ¥0.5 billion, compared with a loss of ¥0.3 billion ayear earlier.
Real Estate
Japan’s real estate industry remains concerned about a sharp increase in supply of new office spacedeteriorating conditions in the Greater Tokyo office leasing market, but for now vacancy rates remain low
as strong corporate earnings support demand for office space. As a result, rents remain on a moderate
upward trend.
In this environment, our real estate leasing business is maintaining high occupancy rates at its
properties in the Tokyo metropolitan area, including Yebisu Garden Place Tower, the business’ coresource of earnings. In addition, the high occupancy rates provide a solid platform for more assertive
efforts to increase rents of existing tenants.
Meanwhile we continue to enhance the asset value of our Yebisu Garden Place commercial
complex—a landmark in the stylish and sophisticated Ebisu district of Tokyo—through constant efforts toprovide tenants and visitors with enjoyable experiences in comfortable and pleasant surroundings thatraise convenience levels and strengthen the property’s brand appeal.
At our GINZA PLACE commercial complex, we continue to enhance the facility’s information
dissemination capability in line with its original concept as a “base for information dissemination andexchange.” In addition to enhancing the property’s brand value, this effort is increasing the property’s
drawing power and making the Ginza district an even more dynamic and bustling urban center.
The real estate development business is proceeding with the renovation of the Sapporo Factorycommercial complex as part of Sapporo City’s urban redevelopment program focused on the nearby
area on the east side of the Sosei River. We will continue our efforts to make the new complex an
attractive urban space.
As a result of the efforts outlined above, the Real Estate business’s first-half revenue totaled ¥12.1
billion, a year-on-year increase of ¥0.4 billion or 3%. Segment operating profit came to ¥4.6 billion, up¥0.3 billion or 8%.

7

(2) Consolidated Financial Condition
Consolidated assets as of June 30, 2018, totaled ¥643.9 billion, ¥20.8 billion less than at the end of theprevious fiscal year (December 31, 2017). The decline is attributable mainly to a decrease in trade andother receivables, which more than offset an increase in other current assets. Consolidated total liabilities
totaled ¥482.1 billion, ¥6.9 billion less than on December 31, 2017, primarily owing to a decrease in othercurrent liabilities, which helped to offset an increase in bonds and borrowings (non-current). Consolidated
total equity totaled ¥161.8 billion, down ¥13.9 billion from the end of the previous fiscal year, primarily
owing to the payment of year-end dividends and the posting of a net loss attributable to owners of parent.
(3) Consolidated Cash Flows
Cash and cash equivalents (hereafter, “cash”) as of June 30, 2018, totaled ¥9.8 billion, a decline of ¥2.7
billion or 22% from December 31, 2017. Consolidated cash flows for the six months ended June 30, 2018,
and the main factors affecting those flows were as follows.
Cash flows from operating activities
Operating activities provided net cash of ¥11.1 billion, ¥7.2 billion or 39% less than in the first half of theprevious fiscal year. The main positive contributors to cash inflows were a ¥16.3 billion decrease in tradeand other receivables and depreciation and amortization totaling ¥14.3 billion. These were outweighed by
outflow related to a ¥5.2 billion decrease in liquor taxes payable.
Cash flows from investing activities
Investing activities used net cash of ¥11.5 billion, ¥5.5 billion or 91% more than in the first half of 2017.
The main outflows were ¥6.0 billion for purchases of property, plant and equipment and ¥6.3 billion forpurchases of investment securities.
Cash flows from financing activities
Financing activities in the first half of 2018 resulted in net cash used totaling ¥2.1 billion, ¥10.2 billion or
83% less than a year earlier. The main cash outflows were ¥17.3 billion for the repayment of long-termbank loans and ¥10.1 billion for the redemption of bonds. The main inflow came from the issuance ofbonds totaling ¥20.0 billion.
(4) Consolidated Earnings Forecast
Considering the impact of intensifying competition in the Japanese Alcoholic Beverage business and theprogress made by other businesses in the first half of the fiscal year, the consolidated earnings forecast
for the full fiscal year ending December 31, 2018 has been revised as follows.
Revision to consolidated earnings forecast for the full fiscal year (January 1 – December 31, 2018)(millions of yen, except percentages and per-share data)

Previous forecast (A)Current forecast (B)Change (B-A)
Percent change
For reference:
Results for the fiscal year
ended December 31, 2017

Revenue
555,800
537,800(18,000)(3.2)%

Operatingprofit18,700
16,100(2,600)(13.9)%

Profitbefore tax
17,70015,100(2,600)(14.7)%

Profitattribute toowners ofparent11,1009,200(1,900)(17.1)%

536,585

12,806

11,538

7,187

8

Basic
earnings pershare
142.50118.11－－92.27

2. Consolidated Financial Statements(1) Consolidated Statement of Financial Position(millions of yen)Transition date
January 1, 2017
AmountDecember 31, 2017

June 30, 2018

AmountAmountAssetsI Current assets
1 Cash and cash equivalents
2 Trade and other receivables
3 Inventories
4 Other financial assets
5 Other current assets
subtotal
6 Assets held for sale
Total current assets

10,476
96,574
37,6199,967
7,386
162,022359
162,381

12,537
98,32537,873
9,107
6,914
164,755
164,755

9,803
81,681
39,955
4,176
10,274
145,890
145,890

II Non-current assets
1 Property, plant and equipment
2 Investment property
3 Goodwill
4 Intangible assets
5 Investments accounted for using equity method
6 Other financial assets
7 Other non-current assets
8 Deferred tax assets
Total non-current assets
Total assets

151,602223,595
21,483
10,305372
79,2788,921
2,176
497,733
660,114151,334
219,658
24,942
13,339391
78,6779,309
2,326
499,976
664,731

151,622219,10724,701
13,206401
78,0018,263
2,746
498,048
643,937

Transition date
January 1, 2017
AmountDecember 31, 2017

June 30, 2018

AmountAmountLiabilities and equity
Liabilities
I Current liabilities
1 Trade and other payables
2 Bonds and borrowings
3 Lease liabilities
4 Income tax payable
5 Other financial liabilities
6 Other current liabilities
Total current liabilities

38,46075,5806,609
1,570
33,10866,424
221,750

36,48880,716
6,533
5,207
33,277
66,590228,80935,75373,956
6,867
1,124
36,24858,055
212,002

II Non-current liabilities
1 Bonds and borrowings
2 Lease liabilities
3 Other financial liabilities
4 Net defined benefit liabilities
5 Other non-current liabilities
6 Deferred tax liabilities
Total non-current liabilities
Total liabilities

165,235
24,623
48,125
8,996
2,689
26,455276,122497,872

153,184
24,29545,9566,283
2,621
27,872
260,212
489,021

163,698
25,41845,564
8,073
2,773
24,613
270,140
482,142

Equity1 Share capital
2 Capital surplus
3 Treasury shares
4 Retained earnings
5 Other components of equity
Total equity attributable to owners of parent
Non-controlling interests
Total equity
Total liabilities and equity

53,88740,706(1,796)36,31528,515
157,628
4,613
162,241
660,11453,88740,825(1,807)44,491
34,659172,055
3,655
175,710
664,73153,88741,007(1,807)
37,57927,987
158,653
3,142
161,796643,9379

(2) Consolidated Statement of Profit or Loss and Comprehensive Income
Consolidated Income statements(millions of yen)Six months ended
June 30, 2017
Amount
250,683
175,660
75,023Six months ended
June 30, 2018
Amount241,740
169,827
71,913

Selling, general and administrative expenses
Other operating income
Other operating expense
Operating profit (loss)

73,264
534
1,132
1,161

74,303516
1,169(3,043)Financial income
Financial expense
Share of profit (loss) of investments accounted for using equity method
Profit (loss) before tax

854
1,345
10
680

656
1,263
10
(3,641)

Income tax expense
Profit (loss)
Profit attributable to
Owners of parent
Non-controlling interests
Total

1,120
(440)

(731)
(2,909)

(188)
(252)
(440)

(2,516)(394)(2,909)Basic earnings per share (JPY)
Diluted earnings per share(JPY)(2.41)(2.41)(32.30)(32.30)Six months ended
June 30, 2017
Amount(440)

Six months ended
June 30, 2018
Amount(2,909)

3,795
497
4,291

(4,677)(1,200)(5,876)

(548)
(5)
(552)
3,739
3,299

(2,317)137(2,180)(8,057)(10,966)

3,780
(482)
3,299

(10,462)(505)(10,966)

Revenue
Cost of sales
Gross profit

Consolidated Statement of Comprehensive Income

Profit(loss)
Other comprehensive income
Items that will not be reclassified to profit or loss
Financial assets measured at fair value through other comprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to profit or loss
Items that might be reclassified to profit or loss
Exchange differences on translation of foreign operations
Effective portion of gains and losses on fair value of cash flow hedges
Total of items that might be reclassified to profit or loss
Other comprehensive income, net of taxes
Comprehensive income
Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income10(3) Consolidated Statements of Changes in Equity(millions of yen)
Equity attributable to owners of parent
Other components of equity

Balance as of January 1, 2017

Share capital

Capital surplus

53,88740,706

Profit (loss)
Other comprehensive income, net of taxes
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Issuance of convertible bonds with stock acquisition rights
Dividends
Transfer from other components of equity to retained earnings
Total transactions with owners
Balance as of June 30, 2017

Treasury shares(1,796)

Retained earnings

Financial assets
Effective portion of
Exchange differences on
measured at fair value
gains and losses on
Remeasurements oftranslation of foreign
through otherfair value of cash
defined benefit planscomprehensive
operations
flow hedges
incomeTotal othercomponents of equity

053,887

(5)
0

0

(5)

40,706(1,800)33,756

Total equity(317)

28,832-28,515

(372)
(372)

47
47

3,797
3,797

497
497

3,968
3,968

(497)
(497)

(517)
(517)

-

31,967

Financial assets
Effective portion of
Exchange differences on
measured at fair value
gains and losses on
Remeasurements ofthrough othertranslation of foreign
fair value of cash
defined benefit plans
operations
comprehensive
flow hedges
incomeTotal othercomponents of equity

34,659172,055

3,655

175,710(7,946)(7,946)
1,274
1,274

(2,516)(7,946)(10,462)(4)
4
182(3,122)(2,940)

(394)
(111)
(505)
(9)
(9)

(2,909)(8,057)(10,966)(4)
4
182(3,130)(2,948)27,987

158,653

3,142

161,796-(188)(2,888)517(2,371)

Non-controllinginterests-

36,315(188)-

Total equity
attributable to ownersof parent

-

-

(20)
(20)

(372)

(270)

32,609157,628
(188)
3,968
3,780
(5)
0
-

4,613
(252)
(229)
(482)
-

162,241
(440)
3,739
3,299
(5)
0
-

(2,888)(2,892)(19)(19)(2,907)(2,912)

158,516

4,112

162,628

Equity attributable to owners of parent
Other components of equity

Balance as of January 1, 2018

Share capital

Capital surplus

53,88740,825

Profit (loss)
Other comprehensive income, net of taxes
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Issuance of convertible bonds with stock acquisition rights
Dividends
Transfer from other components of equity to retained earnings
Total transactions with owners
Balance as of June 30, 2018

Treasury shares(1,807)Retained earnings

1,137

(191)

33,712-(2,516)(2,184)(2,184)113
113(4,676)(4,676)(1,200)(1,200)

1,200
1,200

44,491(2,516)-0
182

53,887

(4)
4

182

(0)

(3,122)(1,274)(4,396)

-

-

74
74

41,007(1,807)

37,579(1,046)(77)

29,111

11-

Total equity
attributable to ownersof parent

Non-controllinginterests

Total equity

(4) Consolidated Statements of Cash FlowsSix months ended
June 30, 2017
AmountI Cash flows from operating activities
1 Profit (loss) before income taxes
2 Depreciation and amortization
3 Loss on impairment of property, plant and equipment
4 Interest and dividend income
5 Interest expenses
6 Share of loss (profit) of investments accounted for using equity method
7 (Gain) loss on sales and disposal of property, plant and equipment, andintangible assets
8 (Increase) decrease in trade and other receivables
9 (Increase) decrease in inventories
10 Increase (decrease) in trade and other payables
11 Increase (decrease) in liquor taxes payable
12 Other
Sub total
13 Interest and dividends received
14 Interest paid
15 Income taxes paid
Net cash provided by (used in) operating activities
II Cash flows from investing activities
1 Purchases of property, plant and equipment
2 Proceeds from sales of property, plant and equipment
3 Purchase of investment property
4 Purchases of intangibles
5 Purchases of investment securities
6 Proceeds from sale of investment securities
7 Payments for long-term loans receivable
8 Collection of long-term loans receivable
9 Other
Net cash provided by (used in) investing activities
III Cash flows from financing activities
1 Net increase (decrease) in short-term bank loans
2 Increase (decrease) in commercial paper
3 Proceeds from long-term bank loans
4 Repayment of long-term bank loans
5 Proceeds from issuance of bonds
6 Redemption of bonds
7 Cash dividends paid
8 Repayment of finance lease obligations
9 Other
Net cash provided by (used in) financing activities(millions of yen)Six months ended
June 30, 2018
Amount680
14,461
217
(853)
1,191
(10)

(3,641)
14,266
557
(641)
1,188
(10)

229
17,849(4,179)(2,182)(11,201)
4,861
21,063959(1,178)(2,598)18,245286
16,251(2,806)(361)(5,244)(830)
19,015692(1,102)(7,541)
11,064(5,633)303(1,946)(1,194)
(6)
87
(41)
4,066
(1,656)(6,021)(5,961)
1,692(2,699)(1,202)(6,339)
109
(46)
4,016
(1,076)(11,505)

1,906(3,500)6,500(10,904)
9,960(10,017)(2,906)(3,292)(5)(12,258)

1,897
3,000
7,000
(17,300)
20,021(10,062)(3,129)(3,503)(0)(2,076)

IV Effect of exchange rate changes on cash and cash equivalents

(123)

(217)

V Net increase (decrease) in cash and cash equivalents(157)(2,734)

10,476
10,31912,537
9,803

VI Cash and cash equivalents at beginning of period
Ⅶ Cash and cash equivalents at end of period

12(5)Notes on the Going-concern Assumption
Not applicable(6).Segment Information
1. Overview of reportable segments
The Company’s reportable segments are components of the Sapporo Group about which separate financial information is available. Thesesegments are subject to periodic examinations to enable the Company's board of directors to decide how to allocate resources and assess
performance.
The Group's businesses are segmented mainly based on the products, services, and sales markets of Group companies and their affiliatedcompanies. The Company's five reportable segments are Japanese Alcoholic Beverages, International, Food & Soft Drinks, Restaurants, andReal Estate.
The Japanese Alcoholic Beverages segment produces and sells alcoholic beverages in Japan, while the international segment produces andsells alcoholic beverages and soft drinks overseas.
The Food & Soft Drinks segment produces and sells foods and soft drinks.
The Restaurants segment operates restaurants of various styles.
The Real Estate segment's activities include leasing and development of real estate.

2. Revenue, profit (or loss)(millions of yen)Six months ended June 30, 2017 (January 1, 2017 – June 30, 2017)
Japanese
Alcoholic
Beverages
Revenue
To outside customers
Inter-segment revenue
Total
Operating profit

119,160
1,534
120,694
591

International

Food &
Soft Drinks

37,88435
37,919486

62,761
127
62,888(257)

Restaurants Real Estate

13,600013,601(348)

11,707
1,276
12,9844,215

Six months ended June 30, 2017 (January 1, 2017 – June 30, 2017)
Other *1
Revenue
To outside customers
Inter-segment revenue
Total
Operating profit

5,570
9,749
15,319
(168)

Total

250,683
12,721
263,404
4,519

Adjustment

Consolidated total

250,683(12,721)(12,721)(3,359)250,683
1,161(millions of yen)Six months ended June 30, 2018 (January 1, 2018 – June 30, 2018)
Japanese
Alcoholic
Beverages
Revenue
To outside customers
Inter-segment revenue
Total
Operating profit

113,383
1,356
114,739(2,340)International

Food &
Soft Drinks

37,818228
38,046(195)

59,624113
59,737(1,266)

Restaurants Real Estate

13,1591
13,160(470)

12,066
1,354
13,4204,553

Six months ended June 30, 2018 (January 1, 2018 – June 30, 2018)
Other *1
Revenue
To outside customers
Inter-segment revenue
Total
Operating profit

5,690
9,804
15,494(99)

Total

241,740
12,856
254,597
184

Adjustment

Consolidated total(12,856)(12,856)(3,227)

241,740
241,740(3,043)(1) "Other" comprises businesses, such as logistics businesses, that are not included in reportable segments.
(2) Segment income and losses are adjusted based on operating income reported on the quarterly
consolidated statements of income for the corresponding period.
(3) The export business of Sapporo International Inc. has been transferred to Sapporo Breweries Ltd. effective January 1, 2018.
Accordingly, the business was previously included in the International business segment,
but has been included in the Japanese Alcoholic Beverages segment.
The consolidated financial statements for fiscal 2017 have been adjusted retroactively to reflect these changes.

13

(First time adoption)
Sapporo Group (the Group) started to disclose the consolidated financial statements based on theInternational Financial Reporting Standards (IFRS) from the first quarter of the fiscal year ending
December 31, 2018. The last consolidated financial statements prepared based on JGAAP is those for the
fiscal year ended December 31, 2017, and the date of transition to IFRS is January 1, 2017.
In principle, IFRS requires that first-time adopters apply IFRS retrospectively. However, IFRS 1 sets out
exceptions under which first-time adopters are optionally exempted or prohibited from the retrospective
application of some of the standards required by IFRS.
The exemptions applied by the Group are as follows:・ Business combination
As IFRS provides exemptions from IFRS 3 "Business Combinations," the Group elected not to apply thestandards retrospectively to business combinations that occurred before the date of transition to IFRS.
Consequently, the amounts of goodwill arising from business combinations that occurred before the dateof transition to IFRS were recognized based on their book value under JGAAP at the transition date. For
reference, at the transition date, an impairment test was implemented for such goodwill with or without
evidence that indicates impairment loss.
・ Deemed cost
With respect to property, plant and equipment items and intangible assets items, IFRS 1 permits the firsttime adopter to use their fair value at the date of transition to IFRS as deemed cost at the date oftransition to IFRS. The Group applied the exemption to certain property, plant and equipment items andused their fair value at the date of transition to IFRS as deemed cost at the date of transition to IFRS.
・ Exchange differences on translation of foreign operations
As is permitted by IFRS 1, the Group elected to deem the cumulative exchange differences on translationof foreign operations to be zero at the date of transition to IFRS.
・ Designation of financial instruments recognized before the transition dateWith respect to the classification described in IFRS 9, IFRS 1 permits an entity to assess financial assets
on the basis of the facts and circumstances that exist at the date of transition to IFRS, instead of thoseexisted at the initial recognition. In addition, based on the facts and circumstances that exist at the date oftransition to IFRS, an entity may designate change in fair value of equity instruments as financial assets
measured at fair value through other comprehensive income. For the classification described in IFRS 9,
the Company assessed financial assets on the basis of the facts and circumstances that exist at the dateof transition to IFRS, and designated certain equity instruments as financial assets measured at fair value
through other comprehensive income.
・ Lease for lessee
With respect to recognition of lease liabilities and right-of-use assets, IFRS 1 permits a first-time adopterthat is a lessee to measure all of its lease liabilities and right-of-use assets at the date of transition to
IFRS. The Group measured lease liabilities at the date of transition to IFRS at the present value of theremaining lease payments discounted using the lessee’s incremental borrowing rate at the date oftransition to IFRS. The Group also measured right-of-use assets at the date of transition to IFRS at an
amount equal to the lease liabilities.
For leases whose period ends within 12 months from the transition date and leases for which theunderlying asset is of low value, the lease payments are expensed over the lease period with the straightline method or another systematic basis.
The reconciliation which IFRS requires a first-time adaptor to disclose are presented below. For reference,"Presentation reclassification" in the following reconciliation tables include items that do not affect retained
earnings and comprehensive income. "Recognition and measurement differences" include items that
affect retained earnings or comprehensive income.

14

Reconciliations of equity as of the IFRS transition date (January 1, 2017)(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

AssetsAssetsCurrent assets
Cash and cash
equivalents
Notes and accounts
receivable - trade
Merchandise and finishedproducts
Raw materials andsupplies

Current assets
10,589114)－

10,47696,85182)

194)

96,57424,657

24,657)－－

13,315

13,315)－－－38,343724)

Trade and otherreceivables

37,619①

Inventories⑥

Other financial assets

－

7,452

2,516

9,967

15,213(7,696)

(131)

7,386

Deferred tax assets

3,640

3,640)－－

Allowance for doubtfulreceivables

82)

82

－

－

164,184(3,627)－359

164,184

3,269)Cash and cash equivalents
①

Other

Total current assets

Other current assets

1,466 162,022－

Subtotal

359

Assets held for sale

1,466 162,381

Total current assets

Fixed assets
Property, plant andequipment

Accounts under IFRS

Non-current assets
345,496

223,544)

29,651 151,602③④

Property, plant andequipment⑤

Goodwill

Intangible assets
Goodwill

27,439－5,956)

21,483

Other

10,511409)

202

10,305－

223,595－ 223,595

59,29659,296)

－

－

－

372

－

372

－

68,783

10,49579,278Long-term loans
receivable

4,790

4,790)

－

－

Other

14,7606,265)

426

8,921

Deferred tax assets

1,071

3,308)

4,414

2,176

Allowance for doubtfulreceivables

1,195)

1,195

－

－

462,168

3,666)

39,231 497,733

626,352(6,935)40,697

Intangible assets
Investment property

Investments and otherassetsInvestment securities

Total fixed assets
Total assets

15

660,114

Investments accounted forusing equity method⑥

Other financial assets②

Deferred tax assets

Other non-current assets

Total non-current assets
Total assets

(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

Accounts under IFRS
Liabilities and equities

Liabilities
Current liabilities
Notes and accounts
payable - trade

Liabilities
Current liabilities
38,503－43)

38,460

Short-term bank loans

30,33730,337)－－

Commercial Paper

33,00033,000)－－Current portion of bonds

10,083

10,083)－－－73,421

2,159

75,580⑥

Bonds and borrowings

Lease obligations

3,024

－

3,584

6,609

④

Lease liabilities

Income taxes payable

1,681

－

111)

1,570

－

32,988120

33,108－

Accrued bonuses

2,980

2,980)－

Liquor taxes payable

34,22834,228)－－Deposits received

8,215

8,215)

－

－

Other

50,072

12,3384,014

66,424

Total current liabilities

212,12396)

Trade and other payables

Income tax payables⑥

Other financial liabilities⑦

Other current liabilities

9,724 221,750

Total current liabilities
Non-current liabilities

Long-term liabilities
Bonds
Long-term bank loans

Net defined benefit
liability
Lease obligations
Dealers’ deposits forguarantees

50,12950,129)－－114,594

114,594)－－－

164,723512 165,235⑥

Bonds and borrowings－

47,609517

48,125⑥

Other non-current financial
liabilities

8,996

－

－

8,996

6,969

－

17,654

24,62333,242

33,242)－－

Net defined benefit liability④

Lease liabilities

Other
Deferred tax liabilities

15,115

14,367)

1,941

2,689

Other non-current liabilities

18,804

6,839)

14,49026,455

Total long-term liabilities

247,848

6,839)

35,113 276,122

Total non-current liabilities

Total liabilities

459,971

6,935)

44,837 497,872

Total liabilities

Common stock

53,887－－53,887

Capital surplus

46,089－5,383)

40,706

Treasury stock, at cost

1,796)－－

1,796)

Retained earnings

41,932－

5,617)

36,315⑨

Retained earnings

Accumulated othercomprehensive income

20,574－

7,941

28,515⑧

Other components of equity②

Net assets

Deferred tax liabilities

EquityShare capital⑤

Capital surplus
Treasury shares

157,628

Total equity attributable toowners of parent

4,613

Non-controlling interests

5,694

－

1,081)

Total net assets

166,381－

4,140) 162,241

Total equity

Total liabilities and net
assets626,352

6,935)

40,697 660,114

Total liabilities and equity

Non-controlling interests

16

Reconciliations of equity as of the end of the six months of FY2017 (June 30, 2017)(millions of yen)Accounts under JGAAP

JGAAP

Recognition
Presentation
andreclassification measurement
differences

IFRS

Notes

AssetsAssetsCurrent assets
Cash and cash equivalents
Notes and accounts
receivable - trade
Merchandise and finishedproducts
Raw materials andsupplies

Other
Allowance for doubtfulreceivables

Total current assets

Current assets
Cash and cash
equivalents
Trade and otherreceivables

10,521(203)－

10,31978,909

(58)

(212)

78,63929,632(29,632)－－

12,385(12,385)－－－

42,322(748)

41,574①

Inventories

－

7,411

388

7,799

⑥

Other financial assets

19,136(11,233)

(116)

7,787

(58)

58

－

－

150,525(3,720)(688)

146,117

－

359

－

359

Assets held for sale

150,525(3,362)(688)

146,476

Total current assets①

Other current assets

Subtotal

Fixed assets
Property, plant andequipment

Accounts under IFRS

Non-current assets
Property, plant andequipment

342,307(222,155)

29,434

149,585③④

Goodwill

25,343－(4,023)

21,320

⑤

Other

9,926

(394)

162

9,694

Intangible assets－

222,191－

222,191

Investment property

63,720(63,720)

－

－

－

382

－

382

－

68,878

11,37080,248

467

(467)

－

－

14,948(7,360)

402

7,989

Intangible assets
Goodwill

Investments and otherassetsInvestment securities

Investments
accounted for using
equity method

Long-term loans
receivable
Other

⑥

Other financial assets

Other non-current
assets－(2,791)

5,077

2,287

Allowance for doubtfulreceivables(1,201)

1,201

－

－

Total fixed assets

455,510(4,235)42,422493,697

Total non-current
assets606,035(7,597)

41,734640,172

Total assets

Total assets

17②

Deferred tax assets

(millions of yen)Accounts under JGAAP

JGAAP

Recognition
Presentation
andreclassification measurement
differences

IFRS

Notes

Accounts under IFRS
Liabilities and equities

Liabilities
Current liabilities
Notes and accounts
payable - trade

Liabilities
Current liabilities
36,281－(43)

36,238

Short-term bank loans

39,272(39,272)－－

Commercial paper

29,500(29,500)－－

Current portion of bonds

10,067(10,067)－－－

78,838142

78,980⑥

Bonds and borrowings

－

2,864

4,081

6,945

④

Lease obligations

2,340

－

(0)

2,339

－

40,006

940,015－

Income taxes payable

Trade and other payables

Income tax payables⑥

Other financial liabilities⑦

Other current liabilities

Accrued bonuses

2,010(2,010)－Liquor taxes payable

23,024(23,024)－－

Deposits received

8,407(8,407)

－

－

Other

56,672(9,523)

5,318

52,467

Total current liabilities

207,572

(94)

9,508

216,985

Bonds

50,129(50,129)－－

Long-term bank loans

102,730(102,730)－－－

152,85951

152,910⑥

Bonds and borrowings⑥

Other financial liabilities

Total current liabilities

Long-term liabilities

Net defined benefit liability

Non-current liabilities－

44,503474

44,977

8,355

－

(324)

8,031

Net defined benefit liability

－

6,531

17,99524,526

Dealers’ deposits forguarantees

30,931(30,931)

－

－

Other

40,733(39,917)

1,907

2,724

－

12,311

15,081

27,392

232,878(7,503)35,184

260,559

440,450(7,597)

44,692477,544

Common stock

53,887－－53,887

Capital surplus

46,090－(5,383)40,706

Treasury stock, at cost

(1,800)－－(1,800)Retained earnings
Accumulated othercomprehensive income

39,267－(5,511)33,756⑨

Retained earnings

22,873－

9,094

31,967⑧

Other components of equity

Total long-term liabilities
Total liabilities④

Other non-current liabilities②

Deferred tax liabilities
Total non-current liabilities
Total liabilities

Net assets

Equity⑤

Capital surplus
Treasury shares

Total equity attributable toowners of parent
Non-controlling interests－(1,157)

4,112

Total net assets

165,585－(2,958)

162,628

Total liabilities and net assets

606,035(7,597)

41,734640,172

18

Share capital

158,516
5,269

Non-controlling interests

Lease obligations

Total equity
Total liabilities and equity

Reconciliations of equity as of the end of FY2017 (December 31, 2017)(millions of yen)Accounts under JGAAP

JGAAP

Recognition
Presentation
andreclassification measurement
differences

IFRS

Notes

Assets

Accounts under IFRS
AssetsCurrent assets

Current assets
Cash and cash
equivalents
Trade and otherreceivables

12,718(181)－

12,53798,605

(103)

(176)

98,325

24,681(24,681)－－

13,638(13,638)－－－

38,718(846)

37,873①

Inventories

－

8,216

892

9,107

⑥

Other financial assets

Other

15,413(8,433)

(66)

6,914

Deferred tax assets

3,900(3,878)(22)－

Allowance for doubtfulreceivables

(103)

103

－

－

Total current assets

168,852(3,878)(219)

164,755

Cash and cash equivalents
Notes and accounts
receivable - trade
Merchandise and finishedproducts
Raw materials andsupplies①

Other current assets

Total current assets

Fixed assets
Property, plant andequipment

Non-current assets
343,763(219,266)

26,837

151,334③④⑤

Property, plant andequipment

Intangible assets
Goodwill

26,948－(2,006)24,942

Other

13,575(391)

155

13,339Intangible assets－

219,658－

219,658

Investment property

62,146(62,146)

－

－

－

391

－

391

－

66,904

11,77378,677

428

(428)

－

－

Goodwill

Investments and otherassetsInvestment securities

Long-term loans
receivable
Other

14,828(5,938)

419

9,309

Deferred tax assets

1,306(5,201)

6,220

2,326

Allowance for doubtfulreceivables(1,216)

1,216

－

－

461,779(5,201)

43,398499,976

630,631(9,079)43,179664,731

Total fixed assets
Total assets

19

Investments accounted
for using equity method⑥

Other financial assets

Other non-current assets②

Deferred tax assets

Total non-current assets
Total assets

(millions of yen)Accounts under JGAAP

JGAAPPresentation
reclassification

Recognition
andmeasurement
differences

IFRS

Notes

Accounts under IFRS
Liabilities and equities

Liabilities

Liabilities

Current liabilities

Current liabilities

Notes and accounts
payable - trade36,530－(43)

36,488

Short-term bank loans

37,882(37,882)－－

Commercial paper

32,000(32,000)－－

Current portion of bonds

10,068(10,068)－－－

79,950765

80,716⑥

Bonds and borrowings

Lease obligations

2,691

－

3,842

6,533

④

Lease obligations

Income taxes payable

5,202

－

5

5,207

－

33,060216

33,277

Accrued bonuses

3,090(3,090)－－Liquor taxes payable

34,408(34,408)－－

Deposits received

7,817(7,817－

Other

50,484

12,2553,850

66,590Total current liabilities

220,173

(0)

8,636

228,809

Trade and otherpayablesIncome tax payables⑥

Other financial
liabilities⑦

Other current liabilities－

Total current liabilities

Long-term liabilities

Non-current liabilities

Bonds

50,061(50,061)－－Long-term bank loans

103,578(103,578)－－－

153,639(455)

153,184⑥－

45,548408

45,956⑥

Net defined benefit liability

5,493

－

790

6,283

Lease obligations
Dealers’ deposits forguarantees

5,960

－

18,33524,29531,086(31,086)

－

－

Other

15,324(14,462)

1,759

2,621

Deferred tax liabilities

21,292(9,079)15,65827,872

Total long-term liabilities

232,795(9,079)36,496260,212452,968(9,079)45,132

489,021

Total liabilities④②

Lease obligations

Deferred tax liabilities
Total non-current
liabilities
Total liabilities
Equity53,887－－

Capital surplus

46,091－(5,266)40,825

Treasury stock, at cost

(1,807)－－(1,807)Retained earnings

50,023－(5,532)44,491⑨

Accumulated othercomprehensive income

25,274－

9,385

34,659⑧－

53,887⑤

Capital surplus
Treasury shares
Retained earnings

172,055

Non-controlling interests

－

(539)

3,655

Total net assets

177,663－(1,952)

175,710

Total liabilities and net assets

630,631(9,079)43,179664,731

20

Share capital

Other components ofequityTotal equity attributable toowners of parent

4,195

Non-controlling interests

Other financial
liabilities
Net defined benefit
liability

Other non-current
liabilities

Net assets
Common stock

Bonds and borrowings

Total equity
Total liabilities and equity

Notes on reconciliations of equity(1) Presentation reclassification
A. Trade and other receivables
Under JGAAP, “Notes and accounts receivable - trade” and “Allowance for doubtful receivables” were
presented separately, though under IFRS, these line items are included in “Trade and other receivables.”B. Inventories
Under JGAAP, “Merchandise and finished products” and “Raw materials and supplies” were presented
separately, and work in progress was included in “Other,” though under IFRS, these line items are reclassified
as “Inventories.”
C. Other financial assets and other financial liabilities
Based on presentation rules of IFRS, “Other financial assets” and “Other financial liabilities” are presented
separately.
Under JGAAP, “Investment securities” and “Long-term loans receivable” were separately presented andderivative assets were included in “Other” in Fixed assets. Though under IFRS, they are included in “Other
financial assets.”
In addition, under JGAAP, “Deposits received” was separately presented in current liabilities, though under
IFRS, it is included in “Other financial liabilities.”
D. Deferred tax assets and deferred tax liabilities
Under JGAAP, “Deferred tax assets” and “Deferred tax liabilities” were separately presented in current assets
and current liabilities, respectively, though under IFRS, these line items are presented in non-current assets
and non-current liabilities.
E. Assets held for sale
Based on IFRS 5, “Assets held for sale” is presented separately.
F. Investment property
Under JGAAP, fixed assets that meet the definition of investment property was included in “Property, plant andequipment” in fixed assets, though under IFRS, it is presented as “Investment property.”(2) Differences on recognition and measurement
1) Trade and other receivables and inventories
Under JGAAP, revenue was recognized mainly at the point of shipment, though under IFRS, it is recognized
mainly at the point of delivery.
In addition, under JGAAP, goods held mainly for advertisement and promotion were recognized as
inventories, though under IFRS, they are recognized as expenses at the point of purchase.
2) Deferred tax assets and deferred tax liabilities
Amounts of deferred tax assets and deferred tax liabilities have been adjusted for reasons such as temporary
differences arising from transition to IFRS from JGAAP.
3) Property, plant and equipment
In line with adoption of IFRS, the Group revised the depreciation method and other procedures for property,
plant and equipment and reduced their book value. In addition, for certain property, plant and equipment
items, the Group applied the exemption that permits the first-time adopter to use the fair value as of thetransition date as deemed cost. The book value of those property, plant and equipment before the applicationof deemed cost as of the transition date was 39,044 million yen and their total fair value was 71,253 million
yen.
4) Lease obligations
Under JGAAP, lease transactions of lessee were classified into finance lease and operating lease. For
operating lease, lease transactions were accounted for in a similar manner with ordinary rental transactions.
Under IFRS, the Group records all of its lease transactions in both leased assets (right-of-use asset) andlease obligations (lease liabilities), as lease transactions of lessee are not classified into finance lease and21

operating lease.
5) Goodwill
Under JGAAP, goodwill was amortized with the straight-line method over a reasonable period up to 20 years,
though from the date of transition to IFRS, the Group ceased to amortize goodwill and instead started toperform an impairment test every year.
In addition, under JGAAP, changes in ownership interests in subsidiaries that do not result in loss ofcontrol (additional acquisition of ownership interests) were accounted for as external transaction withadjustments of goodwill or income and loss. Under IFRS, such changes are accounted for as equity
transaction, which affects “Capital surplus" without any change in goodwill or income and loss.
6) Other financial assets and other financial liabilities
Under JGAAP, the Group recorded unlisted shares based on their acquisition costs and, if necessary,recognized their impairment when the financial position of an issuer deteriorated, though under IFRS, theGroup has elected to measure them at fair value through other comprehensive income.
In addition, under JGAAP, interest-rate swaps that meet specific requirements were treated with a specificaccounting method. Under IFRS, however, they are treated with principle hedge accounting, where derivative
assets/derivative liabilities are recognized accordingly, and valuation differences are recognized in othercomprehensive income.
7) Other current liabilities
Under JGAAP, unused compensated absences were not required to be accounted for, though under IFRS,
they are recognized as liabilities.
Under JGAAP, levies including real-estate tax were recognized at the time of payment, though under
IFRS, they are recognized on the day when the liability is accrued.
8) Other components of equity
With respect to cumulative exchange differences on translations of foreign operations recognized under
JGAAP, the total amount was transferred to “Retained earnings” as of the transition date.
Under JGAAP, the Group recorded unlisted shares based on their acquisition costs and, if necessary,recognized their impairment when the financial position of an issuer deteriorated. Under IFRS, the Group has
elected to measure them at fair value through other comprehensive income.
Under JGAAP, past service cost was recognized in net assets through other comprehensive income when
they occurred and was expensed using the straight-line method over a certain number of years within the
average remaining service period of the employees. Under IFRS, past service cost is recognized in full as
either profit or loss when it occurs.
9) Retained earnings(millions of yen)Transition date
(January 1, 2017)
Trade and other receivables and Inventories (see 1)

Six months ended
Year ended
June 30, 2017
December 31,2017

(418)

(333)

(510)

(1,610)(2,611)(4,851)

Lease obligations (see 4)

252

234

217

Goodwill (see 5)

－

1,904

3,904

Other financial assets、Other financial liabilities (see 6)

263

275

275

Other current liabilities (see 7)(2,739)(3,619)(2,643)

Other components of equity (see 8)(1,382)(1,332)(1,739)

16

(30)

(185)

(5,617)(5,511)(5,532)

Property, plant and equipment (see 3)

OtherTotal adjustments to retained earnings

22

Reconciliations of profit or loss and comprehensive income for the six months of FY2017(January 1, 2017 -June 30, 2017)(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

Accounts under IFRSNet sales

257,970－

7,287) 250,683①

Revenue

Cost of sales

167,487－

8,173 175,660①②④

Cost of sales

Gross profit

90,483－

15,460)75,02387,465－

14,201)

73,264

－

531

3

534

Other operating income

－

1,339

207)

1,132

Other operating expenses

Operating loss

3,018

808)

1,049)

1,161

Non-operating income

1,240

1,240

－

－

Non-operating expenses

1,604

1,604)－－

Extraordinary gains

190

190

－

－

Extraordinary losses

916

916)

－

－

－

888

(34)

854

－

1,180

165

1,345

－

10

0)

10

1,928

－

1,248)

680

1,881

－

761)

1,120

47

－

487)

440)

Selling, general andadministrative expenses

Loss before income taxes
Income taxes
Loss

Gross profit①②③④

Selling, general andadministrative expenses

Operating loss

Finance income
Finance costs
Share of profit of investments
accounted for using equity
methods
Loss before tax⑤

Income tax expense
Loss

Other comprehensive
incomeOther comprehensive income

Unrealized holding gain
on securities

2,894

－

901

3,795

⑤

Remeasurements ofdefined benefit plans

174)

－

671

497

④

Foreign currencytranslation adjustments

542)

－

(6)

(548)

Deferred hedge gains(losses)

(108)

－

104

(5)

Comprehensive income

2,117)

－

1,182

3,299

23

Financial assets measured atfair value through othercomprehensive income
Remeasurements of defined
benefit plans
Exchange differences ontranslation of foreign
operations
Effective portion of gains andlosses on fair value of cash
flow hedges
Comprehensive income

Reconciliations of profit or loss and comprehensive income for FY2017(January 1, 2017 - December 31, 2017)(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

Accounts under IFRSNet sales

551,549－(14,963) 536,585①

Revenue

Cost of sales

358,573－

14,576 373,148①②④

Cost of sales

Gross profit

192,976－(29,539) 163,437

175,944－(29,952) 145,991

－

2,716

Selling, general andadministrative expenses(1,687)
(144)

5,669

Other operating expenses(1,130)12,806

5,813

17,033(3,097)

Non-operating income

2,093

2,093)－－

Non-operating expenses

2,715

2,715)－－

Extraordinary gains

6,814

6,814)－－

Extraordinary losses

5,423

5,423)

－

－

－

6,171

(4,833)

1,338

－

2,324

302

2,626

－

19

(0)

19

17,802－(6,264)

11,5388,182－(3,012)

5,170

9,619

－

(3,252)

6,367

ProfitOperating profit⑤

Finance income
Finance costs
Share of profit of investments
accounted for using equity
methods
Profit before tax⑤

Income tax expense
ProfitOther comprehensive
incomeOther comprehensive income

Unrealized holding gain
on securities

3,416

－

4,785

8,202

⑤

Remeasurements ofdefined benefit plans

189

－

348

537

④

Foreign currencytranslation adjustments

1,019

－

13

1,032

Deferred hedge gains(losses)

60)

－

174

114

14,184－

2,068

16,252Comprehensive income

Selling, general andadministrative expenses
Other operating income

Operating income

Income taxes

①②
③④

1,029

－

Profit before income
taxes

Gross profit

24

Financial assets measured atfair value through othercomprehensive income
Remeasurements of defined
benefit plans
Exchange differences ontranslation of foreign
operations
Effective portion of gains andlosses on fair value of cash
flow hedges
Comprehensive income

Notes on reconciliations of income and comprehensive income(1) Presentation reclassification
A. Other operating income, other operating expenses, finance income, finance costs and share of profit ofinvestments accounted for using equity methods
With respect to line items presented in “Non-operating income,” “Non-operating expenses,” “Extraordinary
gains” and “Extraordinary losses” under JGAAP, the Group has reclassified financial-related items to “Financeincome” or “Finance costs” and other items to “Other operating income,” “Other operating expenses” or“Share of profit of investments accounted for using equity methods” in accordance with IFRS.
(2) Differences on recognition and measurement
1) Revenue, cost of sales and selling, general and administrative expenses
Under JGAAP, some rebates and other related costs were presented in “Selling, general and administrative
expenses,” though under IFRS, these costs are deducted from “Revenue.”
Under JGAAP, revenue was recognized mainly at the point of shipment, though under IFRS, it isrecognized mainly at the point of delivery.
2) Cost of sales and selling, general and administrative expenses
As the Group revised the depreciation method and other procedures for property, plant and equipment in linewith adoption of IFRS, depreciation expense included in cost of sales and selling, general and administrative
expenses have been changed.
In addition, under JGAAP, levies including real-estate tax were recognized at the time of payment, though
under IFRS, they are recognized on the day when the liability is accrued.
3) Selling, general and administrative expenses
Under JGAAP, goodwill was amortized over the period for which its effects are estimated to last, though under
IFRS, goodwill is no longer amortized after the transition date.
4) Cost of sales, selling, general and administrative expenses, and remeasurements of defined benefit plans
Under JGAAP, past service cost was recognized in net assets through other comprehensive income when
they occurred and was expensed using the straight-line method over a certain number of years within the
average remaining service period of the employees. Under IFRS, past service cost is recognized in full as
either profit or loss when it occurs.
5) Income tax expense, financial assets measured at fair value through other comprehensive income
Under JGAAP, the Group recognized gain on sales of investment securities and tax on the gain in“Extraordinary gains” and “Income taxes,” respectively. Under IFRS, which permits to designate certain equity
instruments as financial assets measured at fair value through other comprehensive income, the Group
recognizes the gain on sales of designate equity instruments as “Other comprehensive income.”25