2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知(11) Consolidated Statement of Comprehensive Income (Supplementary Information)
Years ended March 31
2022

2023

(Millions of yen)
Net income
Other comprehensive income (OCI)
Items not to be reclassified into net income
Net changes in financial assets measured at fair value through OCI
Remeasurements of defined benefit plans
Share of OCI of investments accounted for using the equity method
Total items not to be reclassified into net income
Items that can be reclassified into net income
Foreign currency translation adjustments
Net changes in cash flow hedges
Share of OCI of investments accounted for using the equity method
Total items that can be reclassified into net income
Other comprehensive income (OCI)
Comprehensive income
Comprehensive income attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests51

4. Consolidated Statements of Comprehensive Income

670,864

703,870(11,224)
30,795(403)

21,48440,202
1,511

19,16863,197391,489
8,172
41,207232,360
7,265
14,595440,868
460,036
1,130,900

254,220
317,417
1,021,287

958,008
172,892

905,819
115,4682023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知(12) Consolidated Statement of Changes in Equity (April 1, 2022 to March 31, 2023)(Millions of yen)
Commonstock
Balance at beginning of year

461,731

Capitalsurplus

Accumulated
othercomprehensive
incomeRetainedearnings

46,1193,197,725

639,263

Reclassified into retained
earnings

72,970(72,970)

Net income

649,124

Treasurystock, atcost(3,002)

Total
Hitachi, Ltd.
stockholders’equityNoncontrollinginterests

Total equity

4,341,836

1,013,441

5,355,277

Changes in equity

Other comprehensive
income-256,695

Dividends to Hitachi, Ltd.
stockholders(129,148)-

649,124

54,746

703,870

256,695

60,722

317,417(129,148)

Dividends to noncontrolling interests-

Acquisition of treasury
stock(129,148)(34,828)(34,828)(200,212)(200,212)(200,212)

Sales of treasury stock

(94)

258

164

164

Cancellation of treasurystock(199,417)

199,417

-

-

2,172

2,172

-

-

Issuance of new shares

1,086

1,086

Transfer to capital surplus
from retained earnings

153,487

Changes in non-controllinginterests(1,181)(153,487)
23,40422,223(701,368)(679,145)

Total changes in equity

1,086(46,119)

439,459

207,129(537)

601,018(620,728)(19,710)

Balance at end of year

462,817-

3,637,184

846,392(3,539)4,942,854

392,713

5,335,567

52

2. Consolidated Statements of Changes in Equity

2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知(13) Consolidated Statement of Cash Flows (Supplementary Information)
Years ended March 31
2022

2023
(Millions of yen)

Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
Impairment losses
Income taxes
Share of (profits) losses of investments accounted for using the equity method
Financial income and expenses
Net (gain) loss on business reorganization and others(Gain) loss on sale of property, plant and equipment
Change in trade receivables and contract assets
Change in inventories
Change in trade payables
Change in accrued expenses
Change in retirement and severance benefits
Other
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of property, plant and equipment, and intangible assets
Purchase of investments in securities and other financial assets(including investments in subsidiaries and investments accounted for using theequity method)
Proceeds from sale of investments in securities and other financial assets(including investments in subsidiaries and investments accounted for using theequity method)Other
Net cash provided by (used in) investing activities
Free cash flows
Cash flows from financing activities
Change in short-term debt, net
Proceeds from long-term debt
Payments on long-term debt
Proceeds from payments from non-controlling interests
Dividends paid to Hitachi, Ltd. stockholders
Dividends paid to non-controlling interests
Acquisition of common stock for treasury
Proceeds from sales of treasury stock
Purchase of shares of consolidated subsidiaries from non-controlling interests
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year53

5. Consolidated Statements of Cash Flows

670,864

703,870

540,252
35,091
168,469(40,485)(2,012)(102,135)(21,066)(33,292)(330,187)
156,475
9,679(29,122)(52,596)
969,935
16,372
18,824(26,698)(248,490)
729,943526,310
129,894
116,101(52,847)
18,204(297,351)(2,465)(60,673)(244,346)
43,96436,82649,93528,182995,604
25,675
26,419(49,770)(170,883)
827,045(296,968)(142,893)
109,836(252,638)(157,947)
55,580(933,200)(106,069)

168,892

616,31745,467(1,048,866)(318,923)(4,180)151,063
978,108

653,244
44,798(305,943)(111,149)(56,338)(251)451(22,009)(64)
202,739
69,125(47,059)(277,685)
80,062(288,795)
310(129,005)(52,217)(200,212)
164(274,687)(901)(1,142,966)
29,314(135,544)

1,015,886
968,827

968,827
833,2832023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知(14) Notes to Consolidated Financial Statements(Notes on Important Matters for Basis of Presentation of Consolidated Financial Statements)
1. Basis of presentation
The consolidated financial statements presented herein, under Article 120, Paragraph 1 of the Regulations ofCompanies’ Financial Statements, have been prepared in conformity with International Financial ReportingStandards (hereinafter “IFRS”). However, under the second sentence of the above provision, some descriptions
and notes required under IFRS are omitted.
2.

Scope of consolidation and application of equity method
The number of consolidated subsidiaries is 696 and the number of equity-method affiliates is 267.

3.

Accounting standard for income and expenses
The Company recognizes revenue in accordance with the following five-step approach.
Step 1: Identify the contract(s) 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 Company satisfies a performance obligation
The Company offers multiple solutions to meet its customers’ needs which may involve the delivery or
performance of multiple elements, such as goods or services. When the Company enters into multiple contracts
for providing the goods or services, related contracts are combined based on interdependencies between eachcontract’s consideration and the time the Company entered into such contracts, and the transaction price isallocated to each performance obligation on the basis of the relative stand-alone selling prices of each distinct
goods or services for the purpose of recognizing revenue.
In estimating the stand-alone selling price, the Company considers various factors such as market conditions,entity-specific factors and information about the customer or situation of customer.
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange fortransferring promised goods or services to a customer. Variable consideration, such as discounts and rebates, isincluded in the transaction price only to the extent that it is highly probable that a significant reversal in theamount of cumulative revenue recognized will not occur when the uncertainty associated with the variableconsideration is subsequently resolved. The promised amount of consideration does not include a significant
financing component.
For a performance obligation satisfied over time, the Company measures its progress towards complete
satisfaction of that performance obligation based on the costs incurred or the period of services being provided inconsideration of the nature of the goods and services for the purpose of recognizing revenue. When the
Company cannot reasonably measure the progress, revenue is recognized only to the extent of the costs
incurred.
The Company recognizes the incremental costs of obtaining a contract with a customer and the costs directly
related to fulfilling a contract as an asset if those costs are expected to be recovered, and those assets areamortized based on the methods used to recognize revenue of the goods or services to which the assets relate.
The Company recognizes the incremental costs of obtaining a contract as an expense when incurred if theamortization period of the asset is less than one year.
Revenue recognition under long-term projects requires significant assumptions about the estimated total cost,estimated total selling price, risk associated with the contract, and other factors. These estimates are subject tovariance of uncertain economic conditions in the future and may vary due to a variety of reasons beyond ourcontrol. The Company reviews these estimates on an ongoing basis and reflects them in accounting practices.

54

3. Notes to Consolidated Financial Statements、Notes on Important Matters for Basis of Presentation(Basis of presentation)、Notes on Important Matters for B

2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知

4.

Financial assets
The Company has adopted IFRS 9 “Financial Instruments”.
Financial assets measured at amortized cost
Financial assets are subsequently measured at amortized cost when they meet the following requirements:- The financial asset is held within a business model the objective of which is to hold the asset to collectcontractual cash flows.
- The contractual terms of the financial asset provide cash flows on specified dates that are solely payments
of principal and interest on the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value (including direct transaction
costs). The carrying amount of financial assets measured at amortized cost is subsequently measured using
the effective interest method.
Financial assets measured at fair value through other comprehensive income
The Company holds certain equity instruments with the purpose of expanding its revenue base by maintaining
and strengthening business relations with the investees. These equity instruments are classified as Financial
assets measured at fair value through other comprehensive income by designation. They are initially andsubsequently measured at fair value, and the changes in fair value are recognized in OCI. The cumulative
amount of OCI is recognized in equity as AOCI. Dividends on equity instruments designated as fair value
through other comprehensive income are recognized in profit or loss, except where they are considered to bea return of the investment.
Financial assets measured at fair value through profit or loss
Equity instruments not designated as Financial assets measured at fair value through other comprehensive
income and debt instruments not classified as financial assets measured at amortized cost are classified as
Financial assets measured at fair value through profit or loss. These instruments are subsequently measured
at fair value and the changes in fair value are recognized in profit or loss.
Impairment of financial assets
The Company evaluates allowance for doubtful receivables depending on whether the credit risk has
increased significantly since initial recognition, if the credit risk has increased significantly since initialrecognition, the allowance for doubtful receivables is measured at the amount equal to the lifetime expectedcredit losses on the financial assets, if the credit risk has not increased significantly since initial recognition,
the allowance for doubtful receivables is measured at the amount equal to 12-month expected credit losses.
However, for trade receivables, contract assets, and lease receivables, allowance for doubtful receivables isalways measured at the amount equal to the lifetime expected credit losses. Whether credit risk has increased
significantly is determined based on changes in the risk of default and changes in expected credit losses arerecognized in profit or loss as impairment losses.

5.

Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the specific identification
method or by the moving average method for finished goods, semi-finished goods and work in process, andgenerally by the moving average method for raw materials. Net realizable value is the estimated selling price inthe ordinary course of business less the estimated costs of completion and the estimated costs necessary to sell.

6.

Property, plant and equipment, Goodwill and Other intangible assets
Property, plant and equipment
Property, plant and equipment are measured using the cost model and stated at the cost less accumulated
depreciation and accumulated impairment losses. Each asset is depreciated mainly using the straight-line
method over its estimated useful lives. Right-of-use asset is depreciated from the commencement date of thelease to the earlier of the end of the useful life of the underlying asset or the end of the lease term on astraight-line basis.
Goodwill and Other intangible assets
Other intangible assets with finite useful lives are measured using the cost model and stated at the cost lessaccumulated amortization and accumulated impairment losses. Each asset is amortized mainly using thestraight-line method over its estimated useful lives.
Goodwill and Other intangible assets with indefinite useful lives are stated at the cost less accumulated
impairment losses.
Impairment losses
For each non-financial asset, the Company reviews the carrying amount and tests for impairment when there
are events or circumstances indicating an asset’s carrying amount may not be recoverable. For an asset that
does not generate cash flows that are largely independent of the cash flows from other assets, the Company
considers indicators of impairment based on a cash generating unit (CGU) or a group of CGUs. Irrespective of
any indicators of impairment, the Company tests Goodwill and Other intangible assets with indefinite-lives for
impairment annually by estimating the recoverable amount of each CGU (or group of CGUs) to which such
assets are allocated.

55

Notes on Important Matters for Basis of Presentation(Financial assets)、Notes on Important Matters for Basis of Presentation(Inventories)、Notes on Importan

2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知7.

Accounting methods for retirement and severance benefits
The Company and certain subsidiaries have defined benefit pension plans, severance lump-sum payment plansand defined contribution pension plans to provide retirement and severance benefits to employees.
(1) Defined Benefit Plans
Defined benefit plans include defined benefit pension plans and severance lump-sum payment plans. The
present value of defined benefit obligations and retirement benefit costs are measured based on the projected
unit credit method. The present value of defined benefit obligations and the fair value of plan assets are
remeasured as of the end of reporting period. Actuarial differences arising during the year and changes in fairvalue of plan assets (excluding interest income) are recognized in OCI and are not subsequently reclassified into
profit or loss. Any prior service cost, which arises at the time of a plan amendment, is recognized immediately in
profit or loss when such an amendment occurs.
The present value of defined benefit obligations less the fair value of plan assets is presented as the net amountof defined benefit liability or asset in non-current liabilities or assets.
(2) Defined Contribution Plans
Defined contribution pension plans are post-employment benefit plans in which the employer pays a certain
amount of premiums to a third-party asset manager but has no legal or constructive obligation to pay in excess ofsuch contributions. Contributions to the defined contribution plans are recognized in profit or loss in the period
when the service is provided by the employees.
Since the Company and a consolidated subsidiary of the Company introduced a risk-sharing corporate pension
plan on April 1, 2019, for current employees participating in the defined benefit pension plan managed by the
Hitachi Pension Fund, the same has been promoted to the other subsidiaries that participate in pension planmanaged by the Hitachi Pension Fund. On April 1, 2022, newly 43 subsidiaries have changed their pension
plans for current employees from defined benefit pension plan to risk-sharing corporate pension plan, and now
the revision of Hitachi group pension plan managed by the Hitachi Pension Fund has been almost completed.
Under this plan, a risk reserve contribution is determined in advance in accordance with the rules governing theplan, and the pension benefits are adjusted annually based on the financial position of the plan to maintainbalanced finance.
In terms of the corresponding accounting treatments for retirement benefits, risk-sharing corporate pension
plans, for which an entity accepts contribution obligations to the extent stipulated in the rules but has no further
obligations to make any additional contributions, are classified as defined contribution plans. Since this risksharing corporate pension plan, which 43 subsidiaries newly introduced on April 1, 2022, imposes no additional
contribution obligations, the difference between the defined benefit obligations related to the portion transferredto the revised plan and the amount of assets transferred to the revised plan corresponding to the decrease in
defined benefit obligations, 51,185 million yen, was recognized as a settlement loss in Other expenses in theConsolidated Statement of Profit or Loss. In addition, in the Consolidated Statement of Financial Position, Other
non-current assets decreased by 49,334 million yen, and Retirement and severance benefits increased by 1,851
million yen, respectively. Excluding the settlement loss in above, the impacts of changing pension plans on profit
or loss for the fiscal year ending March 31, 2023 are not material.

(Notes on Accounting Estimates)
1. Impairment of Property, Plant and Equipment, Goodwill and Other Intangible Assets (Impairment losses of(129,894) million yen)
The calculation method used in determining impairment of property, plant and equipment, goodwill and otherintangible assets are described in note 6 in the “Notes on Important Matters for Basis of Presentation ofConsolidated Financial Statements”. The Company measures the recoverable amount of an asset or a CGU (ora group of CGUs) as the higher of fair value less costs of disposal and value in use. In measuring fair values, theCompany and its subsidiaries primarily use the income approach (present value technique) based on theestimated future cash flows expected to result from the use of the asset and its eventual disposal or the market
approach to derive reasonable estimates of values in orderly market transactions, such as comparisons of similar
public companies and the current gross value of the asset. Value in use is calculated by the estimated future
cash flows based on business plans approved by management, discounted at the discount rate which is derived
from the weighted average cost of capital. The business plan used is based on external information, reflects
historical experiences, and generally has a maximum of five years. Estimated cash flows beyond the period
covered by the business plan are calculated using the estimated growth rate not exceeding the long-term
average growth rate of the market to which the asset belongs. Although a certain amount of negative impact
caused by soaring material prices and a shortage of semiconductors is included in current business plans, theseplans may be affected by risks related to market or economic environment, and actual result may differ from theestimates. In addition, the discount rate used to calculate the value in use is affected by stock market trends andfluctuations in interest rates.
The group of CGUs to which a significant proportion of goodwill was allocated were the power grids business in
the Green Energy & Mobility segment as of March 31, 2023. Impairment losses on the goodwill of Hitachi Energy
were recognized 38,394 million yen mainly due to the rise in discount rate accompanying the significant rise ininterest rates, etc. for the three months ended September 30, 2022. Furthermore, the Company performed theannual impairment test of the goodwill of the power grids business in the fourth quarter of fiscal year 2022. The
recoverable amount used in the annual impairment test of goodwill of the power grids business was calculated
based on the value in use and in calculation of the value in use, estimated future cash flows was discounted at
the discount rate derived from the weighted average cost of capital. Estimated future cash flows was based on
business plan for five years and beyond the period covered by the business plan were calculated taking into
account growth rate. The significant assumptions were revenue growth rates and gross profit ratios whichreflected past experience and external information. The growth rate was set taking into account long-term
inflation rate announced by an external research organization and the impact of interest rates incorporated
discount rate at the annual impairment test of the goodwill. Additional impairment losses were not recognized as
the result of the annual impairment test.

56

Notes on Important Matters for Basis of Presentation(Retirement and Severance Benefits)、Notes on Accounting Estimates(Impairment of Non-Financial Assets -2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知

2.

3.

4.

The carrying amount of goodwill allocated to the power grids business was 524,951 million yen as of March 31,
2023.
The Company considers it unlikely for the carrying amount of each CGU (or group of CGUs), together withallocated goodwill, would exceed the respective recoverable amounts of the CGU (or group of CGUs) even if the
primary assumptions used for the impairment test changed within a reasonable range.
Employee Retirement Benefits (The ending balance of Retirement and severance benefits of 323,264 million
yen)Calculation methods for employee retirement benefits are described in the note 7 in the “Notes on Important
Matters for Basis of Presentation of Consolidated Financial Statements”.
The measurement of a significant amount of employee retirement benefit costs is derived from actuarial
valuations containing a number of actuarial assumptions including mortality, withdrawal and retirement rates,changes in wages and the discount rate. The Company and its subsidiaries make judgements regarding theactuarial assumptions used by taking into account various factors including personnel demographics, market
conditions and expected trends in interest rates. Actuarial assumptions are determined based on the best
estimates and judgements but may be affected by variance of uncertain economic conditions in the future or byamendments or issuance of related laws.
Long-term projects (The ending balance of Provisions for expected losses on construction contracts of 94,952
million yen)
The Company is engaged in long-term projects to provide goods and services according to customers’
specifications over a specified period of time, and revenue is recognized mainly based on the pattern of the costaccrual (the progress of the project mostly based on the cost incurred relative to the estimated total cost) andprovisions for expected losses on construction contracts are recognized based on future estimated losses when
there is a possibility of incurring losses in the future. For long-term projects, the total estimated revenue iscalculated to the extent that is highly probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when uncertainty associated with the total estimated revenue is subsequently resolved.
In addition, the total estimated costs are estimated considering contract risks and other factors. The Company
regularly reviews these estimates and reflects them in its accounting treatment.
Deferred tax assets (The ending balance of Deferred tax assets of 271,567 million yen)
Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available
against which unused tax loss carryforwards, unused tax credits and future deductible temporary differences canbe utilized. A certain amount of negative impact caused by soaring material prices and a shortage ofsemiconductor is included in future taxable income. In assessing the realizability of deferred tax assets, theCompany considers whether it is more likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income in specific tax jurisdictions during the periods in which these deductible differences become deductible.
The Company carries out an assessment of the scheduled reversals of deferred tax liabilities and projected
future taxable income, including the execution of certain available tax strategies if needed. Based on thesefactors, the Company considers it is more likely than not it will realize the benefits of these deductible differences
as of March 31, 2023. However, the times and amounts of taxable income occurrence may be affected byvariance of uncertain economic conditions in the future, and the actual times and amounts may differ from theestimates. As a result of the reevaluation of a realizability of deferred tax assets in line with an improvement oflong-term forecast related to future taxable income of the Company and its Japanese subsidiaries which apply
the group tax sharing system, for the year ended March 31, 2023, the Company and its Japanese subsidiaries
recognized deferred tax assets on a part of deductible temporary differences which had been unrecognized ever.
In the 2023 Japan tax reform, a corporate income tax corresponding to a global minimum tax was established,
and the tax reform act ("Act for Partial Revision of the Income Tax Act, etc." (Act No. 3 of 2023)), including therules related to the global minimum tax (hereinafter “Global minimum tax system”), was enacted on March 28,
2023. However, IAS 12 “Income Taxes” does not offer specific guidance on accounting for the Global minimum
tax system. It is unclear whether the Global minimum tax system create additional temporary differences,whether to remeasure deferred taxes for the Global minimum tax system and which tax rate to use to measuredeferred taxes. Furthermore, the tax rate that will apply to an entity’s excess profit in future periods depends on anumber of factors that are difficult, if not impossible, to forecast reliably. The Company and its subsidiaries,
therefore, developed an appropriate accounting policy, in accordance with IAS 8 “Accounting Policies, Changes
in Accounting Estimates and Errors”, and concluded that not accounting for deferred taxes related to the Global
minimum tax system would result in the most relevant and reliable information.

57

Notes on Important Matters for Basis of Presentation(Retirement and Severance Benefits)、Notes on Accounting Estimates(Impairment of Non-Financial Assets -2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知(Notes to Consolidated Statement of Financial Position)
1. The components of Trade receivables and contract assets: Accounts receivable of 1,972,168 million yen,Contract assets of 804,500 million yen, and Others of 98,319 million yen.
Trade receivables and contract assets are stated as net of the allowance for doubtful receivables. Others include
notes receivable and electronically recorded monetary claims.
2. Accumulated other comprehensive income: Foreign currency translation adjustments of 635,260 million yen,remeasurements of defined benefit plans of 87,967 million yen, net changes in financial assets measured at fairvalue through other comprehensive income of 115,355 million yen, and net changes in cash flow hedges of
7,810 million yen.
3. Collateralized assets: Trade receivables and contract assets of 349 million yen, investments in securities andother financial assets of 319 million yen, and property, plant and equipment of 2,004 million yen.
Secured debts: 286 million yen.
4. Allowance deducted directly from assets: 83,841 million yen from trade receivables and contract assets, and1,801 million yen from other receivables.
5. Property, plant and equipment include land of 141,293 million yen and buildings and structures of 522,790 million
yen.
Accumulated depreciation and impairment losses of property, plant and equipment are (3,731,315) million yen.
Other intangible assets include software of 208,294 million yen.
6. Guarantees: 11,337 million yen(Notes to Consolidated Statement of Profit or Loss)
1. Other income
Other income of 302,196 million yen mainly consists of net gain or loss on business reorganization and others of
297,351 million yen. It includes a gain on the sale of shares of Hitachi Transport System, Ltd. in the amount of
140,293 million yen, and on the sale of shares of Hitachi Metals, Ltd. in the amount of 95,324 million yen.
2. Other expenses
Other expenses of (245,016) million yen mainly consists of impairment losses on property, plant and equipment
and goodwill and other intangible assets of (129,894) million yen and a settlement loss of (51,185) million yen
due to the change to the risk-sharing corporate pension plan introduced by subsidiaries.
3. Income taxes
Income taxes of (116,101) million yen includes current tax expense of (280,420) million yen and deferred tax
expense of 164,319 million yen.
(Notes to Consolidated Statement of Changes in Equity)
1. Class and number of issued shares and treasury stocks at end of year
(1) Issued shares
Common stock
938,083,077 shares(2) Treasury stocks Common stock
510,830 shares
2. Cash dividends
Total amount of cash dividends
129,148 million yen
3. Class and number of shares to be issued upon exercise of stock acquisition rights at end of year
Common stock
417,340 shares

58

BS Note 1：Trade Receivables and Contract Assets、BS Note 2：OCI、BS Note 3：Collateralized assets、BS Note 4：Allowance deducted directly from assets、BS N

2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知(Notes on Revenue Recognition)
1. Disaggregation of revenue
The Company derives revenues primarily from contracts with customers. The following table shows thedisaggregation of revenue attributable to each reportable segment and geographic area.
(Millions of yen)

Japan

North

Asia

America

Europe

Other
Areas

Overseas
Revenues
Subtotal

Total
Revenues

Digital Systems & Services

1,555,208

236,443

321,996

222,346

53,102

833,887

2,389,095

Green Energy & Mobility

444,499

413,579

458,978

829,339

346,127

2,048,023

2,492,522

Connective Industries

1,480,942

994,751

259,907

201,80337,8691,494,330

2,975,272

Automotive Systems

485,774

699,256455,255

161,012

118,770

1,434,293

1,920,067

Hitachi Construction Machinery

80,64083,04094,67180,460136,303

394,474

475,114

Hitachi Metals

323,193

181,280

283,606

41,547

18,100524,533

847,726

Others391,886

62,748

6,121

8,140

4,120

81,129473,015

Subtotal

4,762,142

2,671,097

1,880,534

1,544,647

714,391

6,810,669

11,572,811

Corporate items and Eliminations(643,898)(35,983)(2,542)(8,699)(539)(47,763)(691,661)

Total

4,118,244

2,635,114

1,877,992

1,535,948

713,852

6,762,906

10,881,150

The Digital Systems & Services segment consists of Front Business, IT Services and Services & Platforms, forwhich revenue amounted to 982,541 million yen, 898,298 million yen and 938,130 million yen for the year ended
March 31, 2023 (including intersegment transactions). Front Business and IT Services are operated mainly inJapan, and Services & Platforms is operated mainly in Japan, North America and Europe.
The Company’s revenues include revenue recognized based on the pattern of the cost accrual arising from longterm projects. Of the revenue recognized during the fiscal year ended March 31, 2023, the amount of revenue
recognized based on the pattern of the cost accrual arising from long-term projects was 1,805,588 million yen.

59

Notes on Revenue Recognition

2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知

2.

3.

Information about satisfaction of performance obligations
The following is information about satisfaction of performance obligations related to major goods and services ofeach reportable segment.
(Digital Systems & Services)
Front Business and IT Services primarily provide goods and services such as system integration, consulting andcloud service. Services & Platforms primarily provides IT products and software.
These long-term projects in system integration, consulting and cloud service businesses provide goods andservices according to customers’ specifications over a specified period of time, and revenue is recognized mainly
based on the pattern of the cost accrual (the progress of the project mostly based on the cost incurred relative tothe estimated total cost) or the passage of time as performance obligations are satisfied over time. Many of thecontracts require payments based on milestones, and in some cases, payments are made before performanceobligations are satisfied.
In IT products and software businesses, revenue is recognized when control over the goods is transferred tocustomers as performance obligations are satisfied at the point in time upon the completion or upon delivery of
the goods. Mostly, payment terms stipulate that the consideration is received within one year after the
performance obligation is satisfied, and there are no significant transactions in which payment terms include
deferred payments, etc.
(Green Energy & Mobility and Connective Industries)
The Green Energy & Mobility segment includes revenue from businesses such as energy solutions and railway
systems. The energy solutions business is operated mainly in Asia, North America and Europe. The railway
systems business is operated mainly in Europe. The Connective Industries segment includes revenue frombusinesses such as building systems, smart life & ecofriendly systems, measurement and analytical systems,
and industry & distribution solutions. The building systems business is operated mainly in China, the smart life &
ecofriendly systems business is operated mainly in Japan, the measurement and analytical systems business is
operated mainly in Japan, Asia, North America and Europe, and the industry & distribution solutions business is
operated mainly in Japan.
Long-term projects related to contracts such as construction in these segments involve manufacturing andproviding goods based on customers’ specifications over a specified period of time. As performance obligations
are satisfied over time, revenue is recognized mainly based on the pattern of the cost accrual (the progress ofthe project mostly based on the cost incurred relative to the estimated total cost). In addition, these segments
provide certain services promised in the contracts such as maintenance throughout the duration of the contract
and recognize revenue over time based on the passage of time. Many of the contracts require payments basedon milestones, and, in some cases, payments are made before performance obligations are satisfied.
Further, in the sale of elevators, home appliances, measurement and analytical systems, industrial equipment,
etc. included in the Connective Industries segment, revenue is recognized when control over the goods istransferred to customers as performance obligations are satisfied at the point in time upon the completion or
upon delivery of the goods. Mostly, payment terms stipulate that the consideration is received within one year
after the performance obligation is satisfied, and there are no significant transactions in which payment terms
include deferred payments, etc.
(Other)In the Automotive Systems, Hitachi Construction Machinery and Hitachi Metals segments, performanceobligations are generally satisfied at a point in time upon completion or upon delivery of the goods, and revenue
is recognized when control over goods is transferred to customers. Mostly, payment terms stipulate that theconsideration is received within one year after the performance obligation is satisfied, and there are no significant
transactions in which payment terms include deferred payments, etc.
These segments provide certain services promised in the contracts such as maintenance throughout the durationof the contract, and they recognize revenue over time based on the passage of time. Mostly, payment terms
stipulate that the consideration is received within one year after the performance obligation is satisfied, and there
are no significant transactions in which payment terms include deferred payments, etc.
Information about contract balances
The following table shows the beginning and ending balances of Trade receivables, Contract assets andContract liabilities from contracts with customers for the fiscal year ended March 31, 2023.
(Millions of yen)
April 1, 2022

March 31, 2023

Trade receivables

2,381,832

2,072,238

Contract assets

665,627

849,402

Contract liabilities

1,150,592

1,314,799

Of the revenue recognized during the fiscal year ended March 31, 2023, the amount included in Contract
liabilities at the beginning of the fiscal year was 745,452 million yen. And the amount related to performanceobligations satisfied in the past periods was not material.

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Notes on Revenue Recognition

2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知4.

Transaction price allocated to remaining performance obligations
The following table shows the balance of unsatisfied performance obligations by reportable segment for the fiscal
year ended March 31, 2023.
(Millions of yen)Intersegment
transactions

5.

Balance of unsatisfied
performance obligations

Digital Systems & Services

52,481

1,253,318

Green Energy & Mobility

45,801

7,554,950

Connective Industries

106,653

1,825,227

Segments of the Company and its subsidiaries that have contracts under which revenue is recognized over along period of time are primarily the Digital Systems & Services segment, Green Energy & Mobility segment andConnective Industries segment.
The estimated timing of unsatisfied performance obligations at the fiscal year ended March 31, 2023 is asfollows.
Approximately 90% of the balance of unsatisfied performance obligations of the Digital Systems & Services
segment was expected to be satisfied within three years and approximately 10% after three years but no morethan five years.
Approximately 60% of the balance of unsatisfied performance obligations of the Green Energy & Mobility
segment was expected to be satisfied within three years and approximately 40% after three years but no morethan five years.
Approximately 90% of the balance of unsatisfied performance obligations of the Connective Industries segment
was expected to be satisfied within three years.
The remaining segments have contracts whose initial expected terms are generally one year or less.
Accordingly, related information is excluded from this disclosure in accordance with the practical expedient.
Assets recognized from the costs incurred for obtaining or fulfilling contracts with customers
The Company and its subsidiaries recognize the costs incurred for obtaining or fulfilling contracts with customers
as an asset to the extent those costs are expected to be recovered. Such costs recognized as an asset as ofMarch 31, 2023 were not material.

61

Notes on Revenue Recognition

2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知(Notes on Financial Instruments)
1. Status of Financial Instruments
The Company and its subsidiaries, in an endeavor to optimize the capital efficiency of their business activities
through efficient management of operating funds, include highly liquid short-term investments, which mature
within three months of the date of acquisition and pose very little risk of fluctuation in value, in “cash equivalents”
as immediately available financial resources.
Customer credit risk regarding receivables is managed based mainly on the current economic conditions,inherent risks, the financial position of the relevant customer and the past record.
Investments in securities and other financial assets mainly comprise equity financial instruments, which aremanaged by constantly monitoring the fair value.
Short-term debt and long-term debt are mainly used to fund business operations and capital expenditures.
2.

Fair Value, etc. of Financial Instruments(1) Fair Value Measurements
The following methods and assumptions are used to measure the fair value of financial assets and liabilities.
Cash and cash equivalents, Trade receivables, Short-term loans receivable, Other accounts receivable, Shortterm debt, Other accounts payable and Trade payables
The carrying amount approximates the fair value because of the short maturity of these instruments.
Investments in securities and other financial assets and Other financial liabilities
The fair value of lease receivables is based on the present value of lease payments receivable calculated foreach group of years to maturity using discount rates that reflect the time to maturity and credit risk.
Investment securities with quoted market prices are estimated using the quoted share prices. In the absence ofan active market for investment securities, quoted prices for similar investment securities, quoted prices
associated with transactions that are not distressed for identical or similar investment securities or other relevant
information including market interest rate curves, referenced credit spreads or default rates, are used todetermine fair value. If significant inputs of fair value measurement are unobservable, the Company uses priceinformation provided by financial institutions to evaluate such investments. The information provided iscorroborated by the income approach using its own valuation model, or the market approach using comparisonswith prices of similar securities.
The fair value of long-term loans receivable is estimated based on the present value of future cash flows using
the interest rate applicable to an additional loan of the same type.
Derivative assets and derivative liabilities are measured at fair value based on quoted prices associated withtransactions that are not distressed, prices in inactive markets, or based on models using interest rate curves
and forward and spot prices for currencies and commodities. If significant inputs are unobservable, the Company
mainly uses the income approach or the market approach to corroborate relevant information provided byfinancial institutions and other available information.
Long-term debt
The fair value of long-term debt is estimated based on quoted market prices or the present value of future cash
flows using the market interest rates applicable to the same contractual terms.
(2) Financial Instruments Measured at Amortized Cost
The carrying amounts and estimated fair values of the financial instruments measured at amortized cost as ofMarch 31, 2023 is as follows.
The fair value estimated for financial assets and liabilities measured at amortized cost is classified in Level 2 ofthe fair value hierarchy.

Carrying amounts(Millions of yen)
Fair Values

AssetsInvestments in securities and otherfinancial assets
Lease receivables
22,85822,858Debt securities
46,72946,729Long-term loans receivable385
385
Liabilities
Long-term debt [1]Bonds
160,000
159,250
Long-term debt
1,022,994
1,022,130[1] Long-term debt is included in Current portion of long-term debt and Long-term debt in the consolidated
statement of financial position.

(3) Financial Instruments Measured at Fair Value
Financial instruments measured at fair value on a recurring basis after the initial recognition are classified into
three levels of the fair value hierarchy based on the measurement inputs’ observability as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2: Valuations measured by direct or indirect observable inputs other than Level 1
Level 3: Valuations measured by significant unobservable inputs
When several inputs are used for a fair value measurement, the level is determined based on the input that issignificant with the lowest level in the fair value measurement as a whole.
Transfers between levels are deemed at the beginning of each quarter period.

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Notes on Financial Instruments、Note on Per Share Information

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The following table presents the assets and liabilities that are measured at fair value on a recurring basis as ofMarch 31, 2023.
(Millions of yen)Class of financial instruments
Financial assets measured at fair value through profit orloss:
Investments in securities and other financial assets
Equity securities
Debt securities
Derivatives
Financial assets measured at fair value through othercomprehensive income:Investments in securities and other financial assets
Equity securities
Total financial assets at fair value
Financial liabilities measured at fair value through profit
or loss:
Other financial liabilities
Derivatives
Total financial liabilities at fair value

Level 1

Level 2

Level 3

Total

335
8,684
-

4,145
78,32728,352
4,959-

28,687
17,78878,327234,175
243,194

82,472

104,445
137,756

338,620
463,422-

49,38549,385-49,38549,385

The following table presents the changes in Level 3 instruments measured on a recurring basis for the year
ended March 31, 2023.
(Millions of yen)
Equitysecurities

Level 3 financial assets
Balance at beginning of year
Gain in profit or loss [1]Loss in OCI [2]Purchases
Sales and redemption
Acquisitions and divestitures
Other
Balance at end of year
Unrealized gain relating tofinancial assets held at end of year [3]

[1]
[2]
[3]

Debt
securities

Total

123,632
777(1,213)33,762(13,513)(13,964)
3,316
132,797

5,686
96
529
(521)
(846)
15
4,959

129,318873(1,213)34,291(14,034)(14,810)3,331
137,756

766

96

862

Gain in profit or loss related to Financial assets measured at fair value through profit or loss is included in
Financial income in the consolidated statement of profit or loss.
Loss in OCI related to Financial assets measured at fair value through other comprehensive income isincluded in Net changes in financial assets measured at fair value through OCI in the consolidated
statement of comprehensive income.
Unrealized gain relating to Financial assets measured at fair value through profit or loss held at the end ofyear is included in Financial income in the consolidated statement of profit or loss.

Fair values are measured by the finance departments in accordance with the Company’s policies andprocedures. Valuation models are determined so that they reflect each financial instrument’s nature,
characteristics and risks most appropriately. The finance departments continually examine changes in important
inputs that could affect the fair value. In case the fair value of a financial instrument was significantly impaired,administrators review and approve the impairment loss.
(Note on Per Share Information)
Hitachi, Ltd. stockholders’ equity per share
Net income attributable to Hitachi, Ltd. stockholders per share

63

Notes on Financial Instruments、Note on Per Share Information

5,271.97 yen
684.55 yen

2023/05/16 21:13:17 / 22961354_株式会社日立製作所_招集通知(Note on Major Subsequent Events)
Repurchase of Shares of Common Stock
The Board of Directors decided to repurchase shares of its own common stock pursuant to Article 459,
Paragraph 1 of the Companies Act of Japan and Article 32 of the Company’s Articles of Incorporation, as follows.
(a) Reason for repurchase
The Company views the return of profits to shareholders through enhancing corporate value from mid- andlong-term perspective and paying dividends continuously as an important managerial issue. The Company
has decided to repurchase its own shares this time, taking into consideration its financial condition and theprice of its common stock as well as the progress of the review of the business portfolio.
(b) Outline of the Repurchase(i) Class of shares to be repurchased
Common stock of the Company(ii) Aggregate number of shares to be repurchased
Up to 20 million shares(2.13% of the number of outstanding shares (excluding treasury stocks))(iii) Aggregate amount of repurchase
Up to 100.0 billion yen(iv) Period of the repurchase
From April 28, 2023 to March 31, 2024(v) Method of repurchase
Expected open market purchase through the Tokyo Stock Exchange(Other Note)
Sale of shares of Hitachi Astemo, Ltd. (hereinafter “Hitachi Astemo”)
On March 30, 2023, the Company entered into the following two agreements regarding the transfer of a part of theshares of Hitachi Astemo, a consolidated subsidiary of the Company in the Automotive Systems segment, to Hitachi
Astemo and Honda Motor Co., Ltd.(hereinafter “Honda”) and for inviting JIC Capital, Ltd. (hereinafter “JICC”) as a new
joint partner.
(i)Share Subscription Agreement with JICC-01 Limited Partnership (hereinafter “JICC-01”) managed by JICC-01 G.K.,
which is a wholly owned subsidiary of JICC including that Hitachi Astemo issues Class shares to JICC-01, and Hitachi
Astemo purchases a part of shares of its common stocks held by the Company, using a portion of the funds raised
through the issuance of Class shares(ii)Agreement for investment in kind and share transfer with Honda including that Hitachi Astemo issues common stocks
to Honda in exchange for Honda to invest the shares of Hitachi Astemo Electric Motor Systems, Ltd. in kind and theCompany transfers a part of shares of Hitachi Astemo’s common stocks to Honda
The consideration is expected to be approximately 158.0 billion yen.
Assuming the series of transactions based on the agreements is settled, it is expected that the Company’s ownership
ratio of shares of Hitachi Astemo will decrease from 66.6% to 40％, and Hitachi Astemo will turn into an equity-method
associate of the Company.
An expected gain on the sale of Hitachi Astemo shares in the amount of approximately 107.0 billion yen will berecognized in Other income in the consolidated statement of profit or loss for the year ending March 31, 2024.
Furthermore, non-controlling interests in Hitachi Astemo will decrease approximately 258.0 billion yen in the
consolidated statement of changes in equity for the year ending March 31, 2024.

64

Notes on Major Subsequent Events、Other Notes