Consolidated Financial Statements

NAGASE & CO., LTD.
Year ended March 31, 2022with Independent Auditor’s ReportFinancial Section

CONTENTS
Consolidated Balance Sheet 2Consolidated Statement of Income 4Consolidated Statement of Comprehensive Income 4Consolidated Statement of Changes in Net Assets 5Consolidated Statement of Cash Flows 

6Notes to Consolidated Financial Statements 

7

Independent Auditor’s Report 311

Consolidated Balance SheetNAGASE & CO., LTD. and Consolidated Subsidiaries (March 31, 2022 and 2021)

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS
Current assets:
Cash and time deposits (Notes 18 and 24)
Notes and accounts receivable (Note 18)
Inventories (Notes 6 and 7)
Other current assets
Less allowance for doubtful accounts
Total current assets

2022

2021

2022

¥    54,211
289,862
157,525
13,935(1,248)514,286¥    49,254
242,558
97,242
13,259(563)
401,751$  442,937
2,368,347
1,287,074
113,857(10,197)
4,202,026

20,39861,43090,7482,337
2,027
176,942(104,387)
72,55420,05459,32789,052
1,680
2,298
172,413(101,516)
70,896

166,664
501,920
741,466
19,095
16,562
1,445,723(852,905)
592,810

9,017
66,58375,60024
29,492
5,912
3,139
3,572
35,248(112)
152,879
225,434¥  739,720

8,997
84,721
93,719211
30,216
7,488
2,929
1,903
31,582(112)
167,938
238,835¥  640,587

73,674544,023
617,698196
240,967
48,30525,64829,185287,997(915)
1,249,113
1,841,932$6,043,958

Non-current assets:
Property, plant and equipment, at cost (Notes 8 and 9):Land
Buildings and structures
Machinery, equipment and vehicles
Leased assets
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net (Note 25)

Investments and other assets:
Investments in securities (Notes 10 and 18):
Unconsolidated subsidiaries and affiliates
Other
Long-term loans receivable
Goodwill (Note 25)
Technology-based assets
Retirement benefit asset (Note 13)
Deferred tax assets (Note 14)
Other assets (Note 9)Less allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets (Note 25)

2

NAGASE Group
Consolidated Financial Statements 2022

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable (Note 18)
Short-term loans (Notes 11 and 18)
Current portion of long-term loans and finance lease obligations (Notes 11 and 18)
Commercial papers (Notes 11 and 18)
Current portion of bonds payable (Notes 11)
Accrued income taxes (Note 14)
Accrued expenses
Accrued bonuses for employees
Accrued bonuses for directors and executive officers
Other current liabilities
Total current liabilities
Long-term liabilities:
Bonds (Notes 11 and 18)
Long-term loans and finance lease obligations (Notes 11 and 18)
Deferred tax liabilities (Note 14)
Retirement benefit liability (Note 13)
Other long-term liabilities
Total long-term liabilities

2022

2021

2022

¥149,036
73,121
9,152
25,00010,000
7,100
6,479
7,648
497
19,799307,836¥119,941
33,05012,089
8,000
—
3,565
6,317
6,042
203
16,928206,139$1,217,714
597,443
74,777204,265
81,70658,01152,93762,489
4,061
161,770
2,515,205

20,00029,256
12,31013,238
1,987
76,791

30,00035,807
16,077
13,292
838
96,016

163,412
239,039
100,580
108,162
16,235
627,429

9,699
10,639280,015

9,699
10,646
265,920

79,24786,9272,287,891(1,534)
298,820(1,503)284,763(12,534)
2,441,539

31,732
178
13,690(161)
45,441

43,57672
1,006
268
44,924259,270
1,454
111,856(1,315)371,280

10,830355,092¥739,720

8,743
338,431¥640,587

88,4882,901,315$6,043,958

Contingent liabilities (Note 22)
Net assets:
Shareholders’ equity (Note 16):
Common stock:
Authorized — 346,980,000 shares
Issued —	120,908,285 shares in 2022 and124,408,285 shares in 2021
Capital surplus
Retained earnings (Notes 23 and 27)
Treasury stock, at cost (Note 17) — 881,767 shares in 2022 and933,995 shares in 2021
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized holding gain on securities (Note 10)
Deferred gain on hedges (Note 19)
Translation adjustments
Retirement benefit liability adjustments (Note 13)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

3Consolidated Statement of Income
NAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2022 and 2021)

Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

2022

¥780,557
641,062
139,494
104,231
35,263¥625,245
510,645
114,600
92,683
21,916$6,377,621
5,237,863
1,139,750
851,630
288,120

Other income (expenses):
Interest and dividend income
Interest expense
Equity in losses of affiliates
Gain on sales of shares of subsidiaries and affiliates
Gain on sales of investments in securities (Note 10)
Loss on sales of shares of subsidiaries and affiliates
Gain on sales of investments in capital of subsidiaries and affiliates
Loss on devaluation of investments in securities (Note 10)
Gain on sales of property, plant and equipment
Gain on donation of property, plant and equipment
Loss on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on impairment of fixed assets (Notes 9 and 25)
Subsidy income
Other, net
Profit before income taxes

1,551(1,176)(1,031)
—
7,037
59
314
(1,436)
16
719
(177)
(453)
(2,974)75
1,770
39,557

1,312(1,064)
(327)
2,657
5,774
1
—
(155)
86
—
(23)
(92)
(1,824)163
846
29,272

12,673(9,609)(8,424)—57,497482
2,566(11,733)
131
5,875(1,446)(3,701)(24,299)613
14,462
323,205

Income taxes (Note 14):
Current
DeferredProfit12,826(141)
26,872

7,851
1,775
19,646

104,796(1,152)
219,560

Profit attributable to:Non-controlling interests
Owners of parent(932)¥ 25,939(816)¥ 18,829(7,615)$  211,937

Net sales (Note 25)
Cost of sales (Note 7)
Gross profit
Selling, general and administrative expenses (Notes 20 and 21)
Operating income (Note 25)

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
NAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2022 and 2021)

Thousands of
U.S. dollars (Note 1)

Millions of yen

ProfitOther comprehensive income (Note 12):
Net unrealized holding (loss) gain on securities
Deferred gain on hedges
Translation adjustments
Retirement benefit liability adjustments
Share of other comprehensive income of affiliates accounted for by the equity method
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

4

NAGASE Group
Consolidated Financial Statements 2022

2022

2021

¥  26,872¥19,646$219,560

2022(11,844)106
13,623
(430)
282
1,736
¥  28,608

10,94569
7963
254
12,241¥31,887(96,773)866
111,308(3,513)
2,304
14,184$233,745¥  26,482¥    2,126¥30,774¥ 1,112$216,374$ 17,371

Consolidated Statement of Changes in Net Assets
NAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2022 and 2021)
Millions of yen

Commonstock

Balance at April 1, 2020
Profit attributable to owners of parent
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Changes in parent’s ownership interest due totransactions with non-controlling interests
Other changes
Balance at April 1, 2021
Profit attributable to owners of parent
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Changes in parent’s ownership interest due totransactions with non-controlling interests
Decrease in retained earnings resulting fromchanges in scope of consolidation
Increase in retained earnings resulting fromchanges in scope of equity method
Other changes
Balance at March 31, 2022

Capitalsurplus

Total
shareholders’equityTotal
Retirement
accumulated
benefit liability
otherTranslation adjustments comprehensive
adjustments(Note 13)
incomeNet unrealized
holding gain
on securities

Deferredgain onhedges

¥   3
—
—
—
—
—

¥  1,051—————¥ (694)—————

Noncontrollinginterests

Total
net assets¥ 32,979—————¥   7,921
—
—
—
—
—

¥   313,243
18,829(5,456)
(952)
0
—

—
963
268
—
—
—
—
—

—
11,94444,924
—
—
—
—
—

—
822
8,743
—
—
—
—
—

(0)
12,767
338,43125,939(5,876)(6,006)
0
—

—

—

—

—

(0)

—

—

—

—

—

(6)

—
106
¥178

—
12,684¥13,690—(430)¥(161)—
516¥45,441—
2,086¥10,830

72,603¥355,092

Total
Retirement
accumulated
benefit liability
otherTranslation adjustments comprehensive
adjustments(Note 13)
incomeNoncontrollinginterests

Total
net assets

Retainedearnings

Treasury stock,at cost¥ 9,699 ¥ 10,646
—
—
—
—
—
—
—
0
—
(0)

¥  257,067
18,829(5,456)——(4,520)¥  (5,071)
—
—
(952)
0
4,520

¥  272,342 ¥   32,618
18,829—(5,456)
—
(952)
—
0
—
—
—

—
—
9,699
—
—
—
—
—

(0)
—
10,646
—
—
—
0
(0)

—
—
265,920
25,939(5,876)——(5,975)——(1,503)——(6,006)
0
5,975

(0)
—
284,763
25,939(5,876)(6,006)0——
10,957
43,576
—
—
—
—
—

—
69
72
—
—
—
—
—

—
(45)
1,006
—
—
—
—
—

—

(0)

—

—

(0)

—

—

—

(6)

—

—

(6)

—

—
—
—
—
¥9,699 ¥10,639

7—¥280,015——¥(1,534)

7—¥298,820—(11,843)¥  31,732

Thousands of U.S. dollars (Note 1)

Commonstock

Balance at April 1, 2021
Profit attributable to owners of parent
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Changes in parent’s ownership interest due totransactions with non-controlling interests
Decrease in retained earnings resulting fromchanges in scope of consolidation
Increase in retained earnings resulting fromchanges in scope of equity method
Other changes
Balance at March 31, 2022

CapitalsurplusRetainedearnings

Treasury stock,at costTotal
shareholders’equityNet unrealized
holding gain
on securities$79,247 $86,984 $2,172,727 $(12,280) $2,326,685 $356,042——
211,937—
211,937———(48,010)—(48,010)————(49,073)(49,073)
—
—
0
—
0
0
—
—
(0)
(48,819)
48,819——Deferredgain onhedges$  588 $  8,220
—
—
—
—
—
—
—
—
—
—

$  2,190—————$367,056—————$71,436 $2,765,185—
211,937—(48,010)—(49,073)
—
0
—
—

—

(0)

—

—

(0)

—

—

—

—

—

—

(0)

—

(49)

—

—

(49)

—

—

—

—

—

—

(49)

—
57
—
—
—
—
—
(96,764)
866 103,636$(12,534) $2,441,539 $259,270 $1,454 $111,856—(3,513)$(1,315)—4,216$371,280

—
—
57
—
—
—
$79,247 $86,927 $2,287,891—
57
17,044
21,268$88,488 $2,901,315

See notes to consolidated financial statements.

5Consolidated Statement of Cash FlowsNAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2022 and 2021)

Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

¥  39,557¥  29,272$  323,205

11,216
2,974
2,478
(75)
1,031
(599)
(869)
(1,551)
1,176(778)(7,285)
1,436

11,008
1,824
2,344
(163)
327
1,395
(1,174)(1,312)
1,064(24)(8,419)155

91,641
24,29920,247(613)
8,424(4,894)(7,100)(12,673)
9,609(6,367)(59,523)
11,733(34,234)(49,346)
20,465
4,859(9,544)
1,926(1,202)(8,956)(17,776)(17,641)(1,034)8,623
2,554
28,7971,950(1,067)(9,288)20,391(279,712)(403,187)
167,21139,701(77,980)
15,737(9,821)(73,176)(145,241)

Investing activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible fixed assets included in other assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Purchases of investments in capital
Proceeds from sales of investments in capital
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation(Increase) decrease in short-term loans receivable included in other current assets, net(Increase) decrease in time deposits, net
Subsidy income
Payments of leasehold and guarantee deposits
Other, net
Net cash (used in) provided by investing activities(8,830)326(1,624)(1,317)
7,736—
890(3,848)
587
(83)
(137)
75
(1,352)(86)(7,664)(8,864)448(704)(3,260)
6,027
(47)
57
—
8,010
319
290
163
—
202
2,643

(72,146)2,664(13,269)(10,761)
63,208—
7,272(31,440)
4,796
(678)
(1,119)613(11,047)(703)(62,619)

Financing activities:
Increase in short-term loans, net
Increase (decrease) in commercial papers, net
Proceeds from long-term loans
Repayments of long-term loans
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Other, net
Net cash provided by (used in) financing activities

33,32517,0001,900(12,039)(6,006)(5,876)(543)(477)
27,282658(22,000)
4,350(1,891)(952)(5,456)(290)(285)(25,866)

272,285
138,900
15,524(98,366)(49,073)(48,010)(4,437)(3,897)
222,910

Effects of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year (Note 24)

2,942
4,783
48,553¥  53,336

913(1,918)50,471¥  48,553

24,03839,080396,707$  435,787

Operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash provided by operating activities:
Depreciation and amortization other than amortization of goodwill
Loss on impairment of fixed assets
Amortization of goodwill
Subsidy income
Share of loss of entities accounted for using equity method(Decrease) increase in retirement benefit liability
Increase in retirement benefit asset
Interest and dividend income
Interest expense
Exchange gain, net
Gain on sales of investments in securities
Loss on valuation of investment securities
Changes in operating assets and liabilities:
Notes and accounts receivable
Inventories
Notes and accounts payable
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash (used in) provided by operating activities

See notes to consolidated financial statements.

6

NAGASE Group
Consolidated Financial Statements 2022

2022

Notes to Consolidated Financial Statements
NAGASE & CO., LTD. and Consolidated Subsidiaries (March 31, 2022)

1. BASIS OF PREPARATION
The accompanying consolidated financial statements of NAGASE & CO., LTD.
(the “Company”) and consolidated subsidiaries are prepared on the basis ofaccounting principles generally accepted in Japan, which are different incertain respects as to the application and disclosure requirements of International Financial Reporting Standards, and have been compiled from the consolidated financial statements prepared by the Company as required by the
Financial Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements, certain
reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in a format
which is more familiar to readers outside Japan.
Certain amounts in the prior year’s consolidated financial statements
have been reclassified to conform to the current year’s presentation. Such

reclassifications had no effect on consolidated profit or net assets.
The U.S. dollar amounts in the accompanying consolidated financial statements have been translated from yen amounts solely for the convenience ofthe reader, as a matter of arithmetic computation only, at ¥122.39 = U.S.$1.00,
the rate of exchange prevailing on March 31, 2022. This translation should not
be construed as a representation that the yen amounts have been, could havebeen, or could in the future be, converted into U.S. dollars at the above or any
other rate.
As permitted by the Financial Instruments and Exchange Act of Japan,
amounts of less than one million yen have been omitted. Consequently, thetotals shown in the accompanying consolidated financial statements (both inyen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and companies that it controls directly or indirectly. Affiliates
over which the Company exercises significant influence in terms of theiroperating and financial policies have been accounted for by the equity
method. All significant intercompany balances and transactions have been
eliminated in consolidation.
Certain subsidiaries were excluded from the scope of consolidation because
the effect of their sales, net profit or loss, total assets and retained earnings on
the accompanying consolidated financial statements was immaterial. The
unconsolidated subsidiaries and affiliates not accounted for by the entity
method were excluded from the scope of application of the equity method,
because their profit or loss and retained earnings attributable to the Company’s interest were not material to the consolidated financial statements.
Of the Company’s subsidiaries, 34 have a December 31 year end, which isdifferent from that of the Company. The financial statements of 11 subsidiaries
have been included in consolidation based on a provisional statement ofaccounts for a full fiscal year ending March 31. As for the other 23 subsidiaries, adjustments have been made for any significant intercompany transactions
that took place during the period between the year end of these subsidiaries
and the year end of the Company.
Unrealized intercompany gains among the Company and the consolidated
subsidiaries have been entirely eliminated and the portion attributable tonon-controlling interests has been charged to non-controlling interests.
(b) Foreign Currency Translation
All monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the rates of exchange in effect at the balance sheet
date, except that receivables and payables hedged by qualified foreign currency forward exchange contracts are translated at the corresponding contract
rates. All other assets and liabilities denominated in foreign currencies aretranslated at their historical rates. Gain or loss on each translation is credited
or charged to income.
Revenue and expense items arising from transactions denominated inforeign currencies are generally translated into yen at the rates in effect at therespective transaction dates. Foreign exchange gain or loss is credited or
charged to income in the period in which such gain or loss is recognized forfinancial reporting purposes.
The balance sheet accounts of the overseas consolidated subsidiaries aretranslated into yen at the rates of exchange in effect at the balance sheet
date, except that the components of net assets excluding non-controllinginterests, net unrealized holding gain on securities, and deferred gain or loss
on hedges are translated at their historical exchange rates. Revenue andexpense accounts are translated at the average rates of exchange in effectduring the year. Adjustments resulting from translating financial statements
whose accounts are denominated in foreign currencies are not included in thedetermination of net income but are reported as “Translation adjustments” asa component of accumulated other comprehensive income or loss in theaccompanying consolidated balance sheets.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits, andshort-term investments which are readily convertible to cash and subject to an
insignificant risk of any change in their value, which were purchased with an
original maturity of three months or less.
(d) Inventories
Inventories are stated at the lower of cost or the net selling value, cost being
determined primarily by the moving-average method.
(e) Investments in Securities
Securities are classified into three categories: trading securities, held-to-­maturity debt securities or other securities. Trading securities, consisting ofdebt and marketable equity securities, are stated at fair value. Gain and loss,
both realized and unrealized, are credited or charged to income. Held-to-­maturity debt securities are stated at their amortized cost. Marketable securities classified as other securities are carried at fair value with any changes in
unrealized holding gain or loss, net of the applicable income taxes, reported
as a separate component of accumulated other comprehensive income or loss.
Non-marketable securities classified as other securities are carried at cost
determined by the moving-average method.
(f) Property, Plant and Equipment and Depreciation(except for leased assets)
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is calculated by the straightline method based on the estimated useful lives of the respective assets.
The estimated useful lives of the principal assets are as follows:
Buildings (other than structures attached to the buildings) 15 to 50 years
Machinery and equipment
2 to 20 years(g) Intangible Assets (except for leased assets)
Technology-based assets recognized upon acquisition are amortized on astraight-line basis over 13 to 17 years.
Costs incurred for computer software obtained for internal use are capitalized and amortized on a straight-line basis over an estimated useful life of
5 years.
(h) Goodwill
Goodwill is amortized over a period not exceeding 20 years on a straight-line
basis. When immaterial, goodwill is charged to income as incurred.‌7

(i) Leased Assets
Leased assets under finance lease contracts which do not transfer ownershipto the lessee are depreciated to a residual value of zero by the straight-line
method over the respective lease terms.
(j) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries provide allowances for doubtful accounts based on their historical experience of bad debts on ordinary
receivables plus an additional estimate of probable specific doubtful accounts
from customers experiencing financial difficulties.
(k) Income Taxes
Income taxes are calculated based on taxable income and charged to incomeon an accrual basis. Deferred tax assets and liabilities are computed based on
the temporary differences between the financial reporting and the tax basesof the assets and liabilities that will result in taxable or deductible amounts inthe future. Computations of deferred tax assets and liabilities are based on
the tax rates which have been enacted as of the balance sheet date. The
Company and certain domestic consolidated subsidiaries have adopted theconsolidated taxation system (the Company is the taxable entity), whichallows companies to make tax payments on the combined profits of theparent company and its wholly owned domestic subsidiaries.
(l) Accrued Bonuses for Employees
Accrued bonuses for employees are provided based on the estimated amountof bonuses to be paid to employees in the following fiscal year which is
attributable to the current fiscal year.
(m) Accrued Bonuses for Directors and Executive Officers
Accrued bonuses for directors and executive officers are provided based on
the estimated amount of bonuses to be paid to directors and executive officers in the following fiscal year which is attributable to the current fiscal year.
(n) Retirement Benefit Liability
Retirement benefit liability is provided based on the amount of the retirement
benefit obligation less estimated pension plan assets at the end of the fiscal
year. The estimated benefit is attributed to each period based on the plan’sbenefit formula.
Prior service cost is charged to income in the fiscal year in which such costis recognized for financial reporting purposes. Actuarial differences are principally credited or charged to income in the fiscal year following the fiscal year
in which such differences are recognized for financial reporting purposes.
(o) Accounting for Significant Revenues and Expenses
The following is a description of the principal performance obligations of theCompany and its consolidated subsidiaries’ principal businesses relating torevenue from contracts with customers and the usual timing at which pointsuch performance obligations are satisfied (the usual time at which revenue
is recognized).
Sales of merchandise and products are classified based on the reportablesegments and revenue is recognized primarily at the time the merchandiseand products are delivered to the customer, since the risks and economic
value of ownership of the products are transferred and the right to receive
payment is established at that time. In addition, the Group may act as anagent in certain transactions. The consideration from the customer is received
primarily within one year of satisfying the performance obligation and does
not include a significant financing component.
When the Group is acting as a principal in a transaction, revenue is recognized at a gross amount of consideration received from the customer, andwhen the Group is acting as an agent for a third party, revenue is presented ina net amount of fees received, which is the gross amount of consideration
received from the customer less the amount collected for the third party.
(p) Derivatives and Hedging Activities
Derivatives positions are carried at fair value with any changes in unrealized
gain or loss charged or credited to income, except for those which meet thecriteria for deferral hedge accounting under which unrealized gain or loss isdeferred as a component of net assets. Foreign currency receivables andpayables hedged by qualified foreign currency forward exchange contracts aretranslated at the corresponding foreign exchange contract rates (“allocation
method”). Interest-rate swaps which meet certain conditions are accounted
for as if the interest rates applied to the swaps had originally applied to theunderlying loans.
Derivative financial instruments are utilized principally in order to manage
the risk arising from adverse fluctuation in foreign currency exchange rates andinterest-rate swaps are also utilized to mitigate the risk of fluctuation in interest rates on loans. Hedging instruments are foreign currency forward exchange
contracts, foreign currency deposits, foreign currency loans and interest-rate
swaps. Hedged items are foreign currency receivables and payables, forecast
transactions and interest rates on loans from financial institutions.
The Company and its consolidated subsidiaries (collectively, the “Group”)
manage derivative transactions in accordance with internal management rules.
Under these rules, the Group conducts foreign currency forward exchange
contracts within a range of actual demand of accounts receivable, accounts
payable and actual transactions in foreign currencies. Execution and management of interest-rate swaps are based on internal management rules andhedged items of interest-rate swaps are identified by individual contracts.
The Company and certain consolidated subsidiaries assess the effectiveness of the hedging activities based on a comparison of the accumulated
fluctuations of the hedged items and those of the hedging instruments in the
period from the start of the hedging activities to the assessment date. However, with regard to interest-rate swaps which meet certain conditions, theevaluation of effectiveness is omitted.
(q) Research and Development Costs
Research and development costs are charged to income when incurred.
(r) Distributions of Retained Earnings
Dividends and other distributions of retained earnings are approved by theshareholders at a meeting held subsequent to the end of the fiscal year towhich such distributions are applicable. The accompanying consolidated
financial statements do not, however, reflect the applicable distributions ofretained earnings as approved by the shareholders subsequent to the fiscal
year end. (Refer to Note 27.)

3. ACCOUNTING CHANGES(a) Application of Accounting Standards for Revenue Recognition
At the beginning of the current fiscal year, the Company adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31,2020). As a result, revenue is now recognized as the amount expected to bereceived in exchange for promised goods or services at the time of the transfer of their control to the customer.
As a result, in transactions for which the Company’s performance obligations in its contracts with customers are determined to be services as an agent

8

NAGASE Group
Consolidated Financial Statements 2022

in arranging the provision of goods or services by another party, such sales tocustomers previously recorded on a gross basis shall be offset by the corresponding cost of sales, and revenue shall be stated on a net basis.
As a result, net sales and cost of sales each for the years ended March 31,
2022 and 2021 decreased by ¥244,835 million ($2,000,449 thousand) and¥204,995 million ($1,851,639 thousand), respectively. Please note that thischange has no impact on profit or loss for the current fiscal year, nor on theamount of net assets.

(b) Application of Accounting Standard for Fair Value Measurement
As of the beginning of the current fiscal year, the Company has applied the
Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July4, 2019). In accordance with the transitional treatment prescribed in paragraph
19 of the Accounting Standard for Fair Value Measurement and paragraph 44-2
of Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July4, 2019), new accounting policies prescribed by the Accounting Standard for
Fair Value Measurement have been adopted prospectively. This change had no
impact on the consolidated financial statements.
Further, information in the notes relating to the breakdown, etc. by appropriate fair value classification of financial instruments is presented in Note 18“FINANCIAL INSTRUMENTS.”

4. SIGNIFICANT ACCOUNTING ESTIMATES
Assessment of impairment of property, plant and equipment and intangible fixed assets(a) Amounts recorded in the consolidated financial statements as of March 31, 2022 and 2021, and for the years then ended are as follows:
Thousands of
U.S. dollars

Millions of yen

Property, plant and equipment
Intangible fixed assets
Impairment losses(b) Information about significant accounting estimates pertaining to
identified items(i) Method of calculation
Non-current assets are grouped into the smallest units that generate cash flows, and are measured for impairment if any indicationof impairment exists and, if so, whether an impairment loss should
be recognized.
	  For the grouping of non-current assets, idle assets are groupedindividually, and business assets are grouped mainly by company orplant. Goodwill is principally allocated to larger unit that includes
related business-use assets.
	  Undiscounted future cash flows used to determine whether impairment losses need to be recognized are calculated in consideration of
main assets’ economic useful lives, etc., based on future business plans.
	  Impairment losses are measured by calculating the recoverable
amount of the relevant asset or asset group as the higher of net

2022

2021

¥72,554
65,0702,974¥70,896
64,5981,824

2022$592,810
531,661
24,299realizable value or the value in use, and the difference between thebook value and the recoverable amount is recorded as an impairment
loss for the current fiscal year. The discount rate used for the calculation of the value in use is basically determined using the time valueof money taking into account the risk related to the business.
(ii) Key assumptions used in the calculation
The key assumptions are the projected sales and costs of sales
included in future business plans, and the discount rate used to
calculate the value in use.
(iii) Effects on consolidated financial statements for the next fiscal year
If the actual profit or loss of each asset or asset group falls below
the business plan, or if there is a significant change in the assumptions on which future business plans are based, the recoverable
amount may fall below the book value and an impairment loss may
be recognized in the next fiscal year.

5. ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
Accounting Standards for Fair Value Measurement, etc.
“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, issued on June 17, 2021)(a) Overview
The revised “Guidance on Accounting Standard for Measurement of Fair
Value” (ASBJ Guidance No. 31 issued on June 17, 2021) is a revision of theprevious July 4, 2019 guidance. As consultations with related parties andother studies on “calculation of the market value of investment trusts” wereconsidered to take a certain period of time and also certain considerations
were required for notes on the fair value of “investments in partnerships, etc.,

recorded on the balance sheet at the net amount of the equity interest,” theguidance had been scheduled to be evaluated for about a year after theoriginal version was issued.
(b) Scheduled date of adoption
The Company expects to adopt the implementation guidance from the beginning of the fiscal year ending March 31, 2023.
(c) Impact of adoption
The Company is currently evaluating the effect of the adoption of the “Implementation Guidance on Accounting Standard for Fair Value Measurement.”

6. INVENTORIESInventories at March 31, 2022 and 2021 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
2022

Merchandise and finished goods
Work in process
Raw materials and supplies
Total¥142,590
2,401
12,533¥157,525

2021¥88,130
1,654
7,457¥97,2422022$1,165,046
19,618102,402$1,287,074

9

7. LOSS ON DEVALUATION OF INVENTORIES INCLUDED IN COST OF SALES
The balance of inventories at the end of the year is the amount after writing down book values due to decline in profitability and following loss on devaluation of
inventories is included in cost of sales for the year ended March 31, 2022 and 2021:
Thousands of
U.S. dollars

Millions of yen
2022

¥622

Loss on devaluation of inventories included in cost of sales

2021

2022

¥1,829$5,082

8. REDUCTIONS IN ACQUISITION COSTS DUE TO SUBSIDIESThe amounts of subsidies received from the Japanese national government and deducted from the acquisition costs of property, plant and equipment at March
31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Buildings and structures
Machinery, equipment and vehicles
Land
Total

2022

2021

2022

¥  433774
190¥1,398¥  401726
190¥1,318$ 3,5386,324
1,552$11,423

Millions of yen

Thousands of
U.S. dollars

2022

2022

¥2,911$23,785

9. LOSS ON IMPAIRMENT OF FIXED ASSETS
Loss on impairment of fixed assets for the years ended March 31, 2022 and 2021 was as follows:

Major use

Classification

Area

Goodwill, business-use assets for product andmanufacturing process development in the resin field

Goodwill, machinery, equipment and vehicles,
and other

Wisconsin, USA

Goodwill related to water soluble support materials for3D printing production and development business

Goodwill

Wisconsin, USA

Total

63

515

¥2,974$24,299

Millions of yen
Major use

Classification

2021

Business-use assets for manufacturing and selling ofcolor formers

Buildings and structures, machinery,equipment and vehicles and other

Hokuriku

Business-use assets for manufacturing and selling ofcolor formers

Buildings and structures, machinery,equipment and vehicles and other

Tennessee, USA

211

Business-use assets for polyimide film glass bonding
business

Machinery, equipment and vehicles
and other

Taipei, Taiwan

951

Business-use assets for manufacturing and selling ofrechargeable battery systems

Buildings and structures, machinery,equipment and vehicles, and other

Tokai

18

Business-use assets for processing of thin glass panels

Buildings and structures, machinery,equipment and vehicles, and otherFujian, China

2

Idle assets

Land

Tokai etc.

Total
The Company and its consolidated subsidiaries group fixed assets for businessuse principally based on business management segments. Fixed assets to bedisposed of and idle assets are grouped individually as the smallest cash-­generating units.
For the year ended March 31, 2021, due to decreasing profitability, thecarrying values of certain fixed assets for business use were reduced to theirrecoverable amounts. As for idle assets, due to a declining fair value, thecarrying fair values were reduced to their recoverable amounts.
The recoverable amounts were measured at the net selling value or thevalue in use. The recoverable amounts for business-use assets for the color
former manufacturing and polyimide film and glass lamination were measured
at the net selling value. The net selling value was calculated based on the

10

Area

NAGASE Group
Consolidated Financial Statements 2022¥  632

7¥1,824appraisal value published by the tax authorities or the real estate appraisers,
or estimated sales value.
For the year ended March 31, 2022, the book value was reduced to therecoverable amount because the Company no longer expects to generate theinitially anticipated earnings.
The recoverable amounts were measured at the net selling value or thevalue in use. Net selling value is based on the assessed value for property tax
purposes or the appraised value of real estate. Goodwill related to the productand manufacturing process development business in the resin segment wasmeasured based in the value in use.
The future cash flows are discounted at a rate of 19.0%.

10. INVESTMENTS IN SECURITIES(a) Marketable securities classified as other securities at March 31, 2022 and 2021 are summarized as follows:
Millions of yen
2022

2021

Carrying value

Acquisition costs

Unrealized gain (loss)

Carrying value

Acquisition costs

Equity securities
Securities whose carrying value does not exceed
their acquisition costs:¥57,951¥13,108

Equity securities
Total

2,560
¥60,5112,810¥15,918

Unrealized gain (loss)¥44,842¥77,661¥15,838¥61,822(249)¥44,592

835¥78,496

1,010¥16,848(174)¥61,648

Securities whose carrying value exceeds theiracquisition costs:

Thousands of U.S. dollars
2022
Carrying value

Acquisition costs

Unrealized gain (loss)

Equity securities
Securities whose carrying value does not exceed
their acquisition costs:$473,495$107,100$366,386

Equity securities
Total

20,917$494,411

22,959$130,060(2,034)$364,343

Securities whose carrying value exceeds theiracquisition costs:“Acquisition costs” in the above table represent the carrying value after recognizing impairment losses.
(b) Securities classified as other securities whose market value is not available and not included in the table (a) at March 31, 2022 and 2021
are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Market value not determinable:
Unlisted equity securities
Total

2022

2021

2022

Carrying value

Carrying value

Carrying value¥6,071¥6,071¥6,225¥6,225$49,604$49,604(c) Proceeds from sales of, and gross realized gain and loss on, other securities for the years ended March 31, 2022 and 2021 are summarized
as follows:
Thousands of
U.S. dollars

Millions of yen

Proceeds from sales
Gain on sales
Loss on sales

2022

2021

2022

¥7,7367,037
6¥6,2175,774
10$63,208
57,49749(d) A breakdown of loss on devaluation of investments in securities for the years ended March 31, 2022 and 2021 is summarized as follows:
Thousands of
U.S. dollars

Millions of yen
2022

Loss on devaluation of investments in securities*
Securities classified as other securities
Total loss on devaluation of investments in securities¥1,436¥1,436

2021

¥155
¥155

2022

$11,733$11,733* Loss on devaluation of investments in securities is recorded on securities with market value whose market value at the end of the fiscal year has declined by 50% or more from its acquisition cost, or whose market value
has declined by 30% or more but less than 50% based on the amount deemed unrecoverable.
	  In addition, loss on devaluation of investments in securities is recorded on securities whose market value is not available by writing down the carrying value to fair value when the decline in fair value is deemed to be
unrecoverable considering the financial position of the issuers, etc., of the securities.

1111. SHORT-TERM LOANS, BONDS, LONG-TERM LOANS, COMMERCIAL PAPERS AND
FINANCE LEASE OBLIGATIONS
Short-term loans at March 31, 2022 and 2021 principally represented loans and commercial papers in the form of deeds at weighted-average annual interest
rates of 1.14% and 1.33% per annum, respectively.
Long-term loans, bonds and finance lease obligations at March 31, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Unsecured loans from banks and insurance companies, payable in Yen, U.S. dollars, and Euros due
through 2032, at rates from 0.15% to 10.00%
Unsecured bonds in Yen, due 2022, at a rate of 0.539%
Unsecured bonds in Yen, due 2024, at a rate of 0.150%
Unsecured bonds in Yen, due 2029, at a rate of 0.290%
Lease obligations
Less current portion
Total

2022

2021

¥  36,997
10,00010,00010,0001,411
68,408(19,152)¥  49,256¥  46,539
10,00010,00010,0001,357
77,896(12,089)¥  65,807

2022$  302,288
81,70681,70681,706
11,529558,935(156,483)$  402,451

The aggregate annual maturities of bonds, long-term loans and finance lease obligations subsequent to March 31, 2022 are summarized as follows:
Years ending March 31,

Millions of yen

Thousands of
U.S. dollars

2023
2024
2025
2026
2027
2028 and thereafter
Total¥19,152
1,627
17,238
5,061
15,041
10,286¥68,408$156,483
13,294140,845
41,351
122,894
84,043$558,935

In order to achieve more efficient and flexible financing, the Company has concluded line-of-credit agreements with certain financial institutions. The status ofthese lines of credit at March 31, 2022 and 2021 is as follows:
Thousands of
U.S. dollars

Millions of yen

Lines of credit
Credit utilized

12

NAGASE Group
Consolidated Financial Statements 2022

2022

2021

¥20,000—¥20,000—

2022$163,412—

12. OTHER COMPREHENSIVE INCOME (LOSS)
Reclassification adjustments and tax effects allocated to each component of other comprehensive income (loss) for the years ended March 31, 2022 and 2021
were as follows:
Thousands of
U.S. dollars

Millions of yen

Net unrealized holding (loss) gain on securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statement of income
Amount before tax effectTax effectNet unrealized holding (loss) gain on securities
Deferred gain on hedges:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statement of income
Amount before tax effectTax effect
Deferred gain on hedges
Translation adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statement of income
Amount before tax effectTax effectTranslation adjustments
Retirement benefit liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statement of income
Amount before tax effectTax effect
Retirement benefit liability adjustments
Share of other comprehensive income of affiliates accounted for by the equity method:Amount arising during the year
Total other comprehensive loss

2022

2021

2022

¥(10,058)(6,800)(16,858)
5,013(11,844)¥20,245(4,767)
15,477(4,532)
10,945$ (82,180)(55,560)(137,740)
40,959(96,773)

125
27
152
(46)
106

92
7
99
(30)
69

1,021
221
1,242
(376)
866

13,623—
13,623—
13,6237—
7—
7

111,308—
111,308—
111,308

(218)
(396)
(614)
184
(430)

594
796
1,390
(427)
963

(1,781)(3,236)(5,017)
1,503(3,513)282¥   1,736

254¥12,2412,304$   14,184

13. RETIREMENT BENEFIT PLANS(a) Outline of retirement benefit plans for employees
The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e., defined benefit pension plans and lump-sum payment plans. Certain
overseas consolidated subsidiaries also have defined benefit plans. Also, the Company and certain consolidated subsidiaries have defined contribution pension
plans. In addition to the retirement benefit plans described above, the Company and its consolidated subsidiaries pay additional retirement benefits undercertain conditions.
(b) Defined benefit plans
The changes in the retirement benefit obligation for the years ended March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the year
Service cost
Interest cost
Actuarial differences
Retirement benefits paid
Changes in scope of consolidation
Other
Balance at the end of the year

2022

2021

¥34,457
1,299
257
20
(1,750)(94)
28¥34,218¥34,228
1,288
245
340
(1,270)(408)
33¥34,4572022$281,534
10,6142,100
163(14,299)(768)
229$279,582

13

The changes in plan assets for the years ended March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the year
Expected return on plan assets
Actuarial differences
Contributions by the Company and its consolidated subsidiaries
Retirement benefits paid
Other
Balance at the end of the year

2022

2021

¥24,093
484
(198)
761
(1,043)
21¥24,119¥22,305
452
934
1,070
(684)
15
¥24,0932022$196,854
3,955(1,618)6,218(8,522)
172$197,067

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of March 31, 2022 and 2021 for
the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen
2022

2021

Unfunded retirement benefit obligation
Net retirement benefit liability in the balance sheet¥  21,481(24,119)(2,637)
12,736
10,098¥  21,671(24,093)(2,422)
12,786
10,363$  175,513(197,067)(21,546)
104,061
82,507Retirement benefit liability
Retirement benefit asset
Net retirement benefit liability in the balance sheet

13,238(3,139)¥  10,098

13,292(2,929)¥  10,363

108,162(25,648)$   82,507

Funded retirement benefit obligation
Plan assets at fair value2022

The components of retirement benefit expenses for the years ended March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Retirement benefit expense

2022

2021

2022

¥1,299
257
(484)
(396)
¥  676¥1,288
245
(452)
796
¥1,877$10,641
2,100(3,955)(3,236)$ 5,523

Actuarial differences included in other comprehensive income (loss) (before tax effect) for the years ended March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen
2022

Actuarial differences¥(614)

2021

2022¥1,390$(5,017)

Unrecognized actuarial differences included in accumulated other comprehensive income (before tax effect) as of March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen
2022

Unrecognized actuarial differences

14

NAGASE Group
Consolidated Financial Statements 2022¥(218)

2021

¥400

2022

$(1,781)The allocation of plan assets, by major category, as a percentage of total plan assets at fair value as of March 31, 2022 and 2021 is as follows:
2022

59%
23
16
2
100%

Bonds
Equity securities
Alternative investments*
Other
Total

2021

59%
23
9
9
100%

* “Alternative investments” consist of insurance-linked securities and private REITs.

The expected long-term rate of return on plan assets is determined as a result of consideration of both the portfolio allocation at present and in the future, andexpected long-term rate of return from multiple plan assets at present and in the future.
The assumptions used in accounting for the above plans were as follows:
2022

0.8%
2.0%

Discount rate
Expected long-term rate of return on plan assets

2021

0.8%
2.0%

(c) Defined contribution plans
Thousands of
U.S. dollars

Millions of yen
2022

Contributions to defined contribution plans by the Company and its consolidated subsidiaries

¥592

2021

¥494

2022

$4,837

14. INCOME TAXES
Income taxes applicable to the Company and its domestic consolidated subsidiaries consist of corporation, inhabitants’ and enterprise taxes, which, in the aggregate, resulted in statutory tax rates of approximately 30.6% for the years ended March 31, 2022 and 2021.
The effective tax rates reflected in the accompanying consolidated statements of income for the years ended March 31, 2022 and 2021 differ from thestatutory tax rates for the following reasons:2022

Statutory tax rates
Adjustments for:Expenses not deductible for income tax purposes
Dividends and other income deductible for income tax purposes
Net adjustment resulting from elimination of dividend income upon consolidation
Different tax rates applied at overseas subsidiaries
Tax credit
Amortization of goodwill
Loss on impairment of goodwill
Adjustment of book value of shares of subsidiaries for consolidated taxation system
Equity in losses of affiliates
Valuation allowance
Other, net
Effective tax rates

2021

30.6%

30.6%

1.7
(5.5)
5.5
(3.8)
(1.1)
1.9
0.8
(0.1)
0.8
0.8
0.5
32.1%

1.2
(8.9)
8.6
(3.2)
(1.1)
2.5
—
2.7
0.3
0.8
(0.6)
32.9%

15

The significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities at March 31, 2022 and 2021 are summarized
as follows:
Thousands of
U.S. dollars

Millions of yen
2022

2021

Deferred tax assets:
Accrued bonuses for employees
Allowance for doubtful accounts
Unrealized gain on inventories
Accrued enterprise taxes
Tax loss carryforwards
Retirement benefit liability
Investments in securities
Loss on impairment of fixed assets
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets¥   1,888
110
728
345
3,034
3,018
2,298
941
3,731
16,098(6,370)9,727¥   1,492
194
609
265
3,158
3,069
1,274
1,027
3,827
14,919(4,867)
10,052$   15,426
899
5,948
2,819
24,79024,65918,776
7,689
30,485131,530(52,047)
79,475

Deferred tax liabilities:
Technology-based assets
Deferred capital gain on property
Reserve for special depreciation
Undistributed earnings of subsidiaries and affiliates
Revaluation of land
Net unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities(1,801)(1,055)
(99)
(406)
(291)
(13,276)(1,534)(18,464)¥ (8,737)(2,280)(1,139)
(150)
(610)
(290)
(18,292)(1,462)(24,226)¥(14,174)(14,715)(8,620)(809)(3,317)(2,378)(108,473)(12,534)(150,862)$ (71,387)(Accounting for corporate and local income taxes or tax effectaccounting related to these taxes)
The Company and some of its consolidated subsidiaries had previously applied
the consolidated taxation system, but due to the submission of a notificationof non-application of the group tax sharing system during the current fiscal
year, the Company will shift to the non-consolidated taxation system from thefollowing fiscal year. Accordingly, based on “Practical Solution on Accounting
and Disclosure Under the Group Tax Sharing System” (Practical Solution
No. 42, August 12, 2021), accounting and disclosure for tax effect accounting

2022

related to corporate and local income taxes are based on the assumption thatthe non-consolidated taxation system will be applied from the next fiscal year.
Accounting and disclosure regarding corporate and local income taxes arein accordance with “Tentative Treatment of Tax Effect Accounting Under
Consolidated Taxation System (Part 1)” (PITF No. 5, February 16, 2018) and“Tentative Treatment of Tax Effect Accounting Under Consolidated Taxation
System (Part 2)” (PITF No. 7, February 16, 2018) since the consolidated
taxation system was applied in the current fiscal year.

15. REVENUE RECOGNITION(a) Information on disaggregation of revenue from contracts with customers
Information on disaggregation of revenue from contracts with customers is presented in the Segment Information. (Refer to Note 25.)(b) Information that forms the basis for understanding revenues from contracts with customers
The information that forms the basis for understanding revenues is presented in the Summary of significant accounting policies. (Refer to Note 2(o).)(c) Information about the relationship between the fulfillment of performance obligations based on the contract with the customer and the
cash flow generated from the contract, and the amount and recognition timing of revenue from the contract with the customer existing at
the end of the current consolidated fiscal year expected to be recognized in the following consolidated fiscal year(i) Contract balances
The following is a breakdown of contract balances of the Company and its consolidated subsidiaries for the current fiscal year. In the consolidated balance
sheets, receivables from contracts with customers are included in “Notes and accounts receivable” and contract liabilities are included in “Other current
liabilities.” At the end of the previous consolidated fiscal year and the end of the current consolidated fiscal year, the beginning balance of contract liabilities
were transferred to revenue by the end of the fiscal year, and the amount carried forward from the next consolidated fiscal year onward is not significant.
Thousands of
U.S. dollars

Millions of yen

Receivables from contracts with customers
Contract liabilities

16

NAGASE Group
Consolidated Financial Statements 2022

2022

2021

2022

¥289,862
3,789¥242,558
3,041$2,368,347
30,958	  As at March 31, 2022, Accounts receivable and Notes receivable from contracts with customers included in the table above are ¥253,120 million($2,068,143 thousand) and ¥36,742 million ($300,204 thousand), respectively.
(ii) Transaction price allocated to remaining performance obligations
Since there are no transactions with individual expected contract terms exceeding one year, the practical expedient method is applied and information onremaining performance obligations is omitted. There is no material consideration with respect to contracts with customers that is not included in thetransaction price.

16. SHAREHOLDERS’ EQUITYThe Corporation Law of Japan (the “Law”) provides that an amount equal to
10% of the amount to be disbursed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than the legal reserve)
be transferred to the capital reserve and the legal reserve, respectively, until
the sum of the capital reserve and the legal reserve equals 25% of the capitalstock account.
Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met.
The Company’s capital reserve included in capital surplus at March 31,

2022 amounted to ¥9,634 million ($78,716 thousand). In addition, theCompany’s legal reserve included in retained earnings at March 31, 2022
amounted to ¥2,424 million ($19,806 thousand).
Under the Law, upon the issuance and sale of new shares of common
stock, the entire amount of the proceeds is required to be accounted for ascommon stock, although a company may, by resolution of the Board of Directors, account for an amount not exceeding 50% of the proceeds of the sale of
new shares as additional paid-in capital.

Movements in common stock during the years ended March 31, 2022 and 2021 are summarized as follows:
Number of shares
2022
April 1, 2021

Common stock

Increase

124,408,285—

Decrease

March 31, 2022

3,500,000

120,908,285

Decrease

March 31, 2021

3,000,000

124,408,285

2021
April 1, 2020

Common stock

Increase

127,408,285—

17. TREASURY STOCK
Movements in treasury stock during the years ended March 31, 2022 and 2021 are summarized as follows:
Number of shares
2022
April 1, 2021

Treasury stock

933,995

Increase

Decrease

3,447,833

3,500,061

March 31, 2022

881,767

2021
April 1, 2020

Treasury stock
The increase in treasury stock includes 3,447,500 shares resulting from thepurchases of treasury stock by resolution of the Board of Directors and 333
shares resulting from the purchase of shares less than one voting unit for
the year ended March 31, 2022. The decrease in treasury stock includes
3,500,000 shares resulting from the retirement of treasury stock by resolutionof the Board of Directors and 61 shares resulting from the disposition ofshares less than one voting unit for the year ended March 31, 2022.

3,396,695

Increase

537,380

Decrease

3,000,080

March 31, 2021

933,995

The increase in treasury stock includes 537,100 shares resulting fromthe purchases of treasury stock by resolution of the Board of Directors and
280 shares resulting from the purchase of shares less than one voting unit
for the year ended March 31, 2021. The decrease in treasury stock includes
3,000,000 shares resulting from the retirement of treasury stock by resolution of the Board of Directors and 80 shares resulting from the dispositionof shares less than one voting unit for the year ended March 31, 2021.

18. FINANCIAL INSTRUMENTS(a) Policy for financial instruments
The Group invests excess funds in highly secure and short-term financial
assets, whose principal is guaranteed to be recoverable. With regard to financing policy, short-term working funds are raised by bank borrowings or issuance of commercial papers and long-term funds are raised by bankborrowings and the issuance of bonds. The policy for derivative transactions isthat those are utilized to mitigate the fluctuation risk related to foreign
currency exchange rates arising from the receivables and payables denominated in foreign currencies, and fluctuation risk related to interest rates withrespect to loans payable, and derivative transactions are not carried out for
speculative purposes.

(b) Types of financial instruments, related risk and risk management
for financial instruments
Receivables such as trade notes and accounts receivable are exposed tocustomers’ credit risks. With regard to this risk, the Group manages thesettlement date by each customer, and establishes credit limits by each customer based on the Group’s internal credit rating policy and monitors outstanding balances. The Group establishes system under which the credit status
by each customer is reviewed at least once a year and the sales limit amount
updated as necessary.

17

In the cases of notes and accounts receivable or payable denominated inforeign currencies, foreign currency forward exchange contracts are used tohedge the risk of fluctuation. However, for foreign currency transactions denominated in the same currency involving either payables or receivables, foreign
currency forward exchange contracts are used solely for the netted position.
Investments in securities are subject to market price fluctuation risk.
However, these are mainly equity securities of other companies with which theGroup has business relationships. The Group regularly monitors both their fairvalue and the financial condition of the issuer. The Group also reviews asneeded the condition of its holdings with concern to the status of businessand financial transactions.
Short-term loans are raised primarily in connection with business activities.
Long-term loans and bonds are taken out principally for the purpose of

making capital spending, investments and financing. Loans with variableinterest rates are subject to the risk of fluctuating interest rates. However, toreduce such risk, the Group utilizes derivatives (interest-rate swap transactions) as a hedging instrument.
Derivatives include foreign currency forward exchange contracts tomanage fluctuation risk in foreign currency exchange rates and interest-rate
swaps to manage fluctuation risk of interest rates related to the interest
payments for bank loans.
In addition, notes and accounts payable and bank loans are exposed toliquidity risk. However, the Group manages such risk by monitoring the balance of inflow and outflow of cash and establishing liquidity on hand inexcess of half of the amount of monthly net sales.

(c) Fair value of financial instruments
The carrying value of financial instruments on the consolidated balance sheets, fair value and the differences as of March 31, 2022 and 2021, are shown in thefollowing table. Financial instruments for which fair value is deemed extremely difficult to determine are not included.
Millions of yen
2022

Assets:
Notes and accounts receivable
Investments in securities*2:
Other securities
Total assets
Liabilities:
Notes and accounts payable
Bonds
Long-term loans
Total liabilities
Derivatives*3:
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Carrying value

Fair value

Difference¥289,862¥289,862¥  —

60,511¥350,374

60,511¥350,374—¥  —¥149,036
20,00028,244¥197,280¥149,036
19,82027,992¥196,849

¥  —
(180)
(251)
¥(431)¥     (150)341¥    191¥     (150)341¥    191

¥  —
—
¥  —

Millions of yen
2021

Assets:Cash and time deposits
Notes and accounts receivable
Investments in securities*2:
Other securities
Total assets
Liabilities:
Notes and accounts payable
Short-term loans
Current portion of long-term loans
Commercial papers
Bonds
Long-term loans
Total liabilities
Derivatives*3:
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

18

NAGASE Group
Consolidated Financial Statements 2022

Carrying value

Fair value

Difference¥ 49,254
242,558¥ 49,254
242,558¥ ——78,496¥370,308

78,496¥370,308—¥ —¥119,941
33,05012,0258,000
30,00034,514¥237,531¥119,941
33,05012,0258,000
29,89934,528¥237,443

¥ —
—
—
—
(101)
13
¥ (87)¥    (594)56¥    (537)¥    (594)56¥    (537)

¥ —
—
¥ —

Thousands of U.S. dollars
2022

Assets:
Notes and accounts receivable
Investments in securities*2:
Other securities
Total assets
Liabilities:
Notes and accounts payable
Bonds
Long-term loans
Total liabilities
Derivatives*3:
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Carrying value

Fair value

Difference$2,368,347$2,368,347$     —

494,411$2,862,767

494,411$2,862,767—$     —

$1,217,714
163,412230,770$1,611,896$1,217,714
161,941
228,711$1,608,375$     —
(1,471)(2,051)$(3,522)$   (1,226)
2,786$    1,561$   (1,226)
2,786$    1,561$     ——
$     —

*1 Cash is omitted from the notes. Time deposits, short-term loans, current portion of long-term loans, commercial papers, and current portion of bonds are omitted from the notes because their fair values approximate
their carrying amounts due to their short maturities.
*2 Stocks and other securities without market quotations are not included in “Investment securities*2.” The carrying amount of such financial instruments on the consolidated balance sheet is as follows:

Thousands of
U.S. dollars

Millions of yen

Unlisted equity securities
Investments in unconsolidated subsidiaries and affiliates
Total

2022

2021

¥ 6,071¥ 6,2252022$ 49,604

9,017

8,997

73,674¥15,089¥15,222$123,286*3 Receivables and payables arising from derivative transactions are presented as a net value with the amount in parentheses representing a net liability position.

The redemption schedule for time deposits and notes and accounts receivable with maturity dates at March 31, 2022 is summarized as follows:
Millions of yen

Time deposits
Notes and accounts receivable
Total

Within 1 year

Over 1 year andless than 5 years¥ 50,111
289,862¥339,974¥——¥—

Thousands of U.S. dollars

Time deposits
Notes and accounts receivable
Total

Within 1 year

Over 1 year andless than 5 years$  409,437
2,368,347$2,777,792

$—
—
$—

With respect to the redemption schedule of bonds, long-term loans and finance lease obligations, please refer to Note 11.
The fair value of financial instruments is classified into the following three levels based on the observability and materiality of the inputs used to determine
fair value.
Level 1 fair value:
In the inputs related to the calculation of observable fair value, fair value is calculated based on quoted market prices for assets or liabilities whose fairvalue are formed in an active market.
Level 2 fair value
In the inputs related to the calculation of observable fair value, fair value is calculated by using inputs related to the calculation of fair value other thanLevel 1 input.
Level 3 fair value
Fair value is calculated using inputs related to the calculation of unobservable fair value.
When multiple inputs that have a significant effect on fair value are used, fair value is classified into the level with the lowest priority in the fair value calculation
among the levels to which those inputs belong.

19

Financial instruments recorded on the consolidated balance sheet at fair value.
Millions of yen
2022
Level 1

Investments in securities:
Other securities:
SharesDerivatives:
Forward exchange contracts
Total assets

Level 2

Level 3

Total

¥60,511¥  —¥—¥60,511—¥60,511

191
¥191

—
¥—

191
¥60,703

Thousands of U.S. dollars
2022

Investments in securities:
Other securities:
SharesDerivatives:
Forward exchange contracts
Total assets

Level 1

Level 2

Level 3

Total

$494,411$    —$—$494,411—$494,411

1,561$1,561—$—

1,561$495,980

Financial instruments other than those recorded on the consolidated balance sheets at fair value
Millions of yen
2022
Level 1

¥—
¥—
¥—
—
—
¥—

Notes and accounts receivable
Total assets
Notes and accounts payable
Bonds
Long-term loans
Total liabilities

Level 2

Level 3¥289,862¥289,862¥149,036
19,82027,992¥196,849

¥—
¥—
¥—
—
—
¥—

Total

¥289,862¥289,862¥149,036
19,82027,992¥196,849

Thousands of U.S. dollars
2022
Level 1

$—
$—
$—
—
—
$—

Notes and accounts receivable
Total assets
Notes and accounts payable
Bonds
Long-term loans
Total liabilities

Level 2

$2,368,347$2,368,347$1,217,714
161,941
228,711$1,608,375

Level 3

$—
$—
$—
—
—
$—

Total

$2,368,347$2,368,347$1,217,714
161,941
228,711$1,608,375

Explanation of valuation techniques used, and inputs related to the calculation of fair value.
(i)

Notes and accounts receivable
The fair value of notes and accounts receivable is calculated basedon the present values classified by the certain period of times which
are discounted respectively by the interest rate determined taking
into account the remaining period to maturity and is classified as
Level 2.
(ii) Investment securities
Listed stocks are valued by using quoted market prices. Since listed
stocks are traded in active markets, their fair value is classified as
Level 1.

20

NAGASE Group
Consolidated Financial Statements 2022(iii) Derivative
Fair value is calculated based on prices, etc., provided by counterparty financial institutions and is classified as Level 2.
	  The fair value of foreign currency forward exchange contracts andother derivatives that applied the allocation method is included in
the fair value of the underlying accounts receivable and payable.
	  The fair value of interest rate swaps that applied the exceptional
accounting treatment is included in the long-term loans because it isaccounted for as if the interest rates applied to the swaps hadoriginally applied to the underlying long-term loans.

(iv) Notes and accounts payable
The fair value of notes and accounts payable is calculated based on
the present values classified by the certain period of times which arediscounted respectively by the interest rate determined taking into
account the remaining period to maturity and is classified as Level 2.

(v) Bonds
The fair value of bonds issued by the Company is calculated basedon quoted market prices and classified as Level 2.
(vi) Long-term loans
The fair value of long-term loans payable is calculated based on thepresent value of the total of principal and interest discounted by theincremental borrowing rate and is classified as Level 2.

19. DERIVATIVES AND HEDGING ACTIVITIESThe currency-related derivatives positions outstanding for which hedge accounting has not been applied at March 31, 2022 and 2021 are as follows:
Millions of yen
2022

Classification

Transaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
Others
Buying:U.S. dollars
YenEuro
Others
Total

Contract value(notional principal
amount)Contract value(notional principal
amount over
one year)¥13,772
57,411
13,206
801
173

¥—
—
—
—
—

¥(353)
(64)
298
(45)
(11)

¥(353)
(64)
298
(45)
(11)

1,955
2,310
239
173
¥90,043

—
—
—
—
¥—

29
(20)
10
7
¥(150)

29
(20)
10
7
¥(150)

Fair value

Valuation
gain (loss)

Millions of yen
2021

Classification

Transaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
Others
Buying:U.S. dollars
YenEuro
Others
Total

Contract value(notional principal
amount)Contract value(notional principal
amount over
one year)¥ 6,980
2,540
9,977
1,241
190

¥—
—
—
—
—

¥(130)
(38)
(402)
(48)
(5)

¥(130)
(38)
(402)
(48)
(5)

1,263
1,616
442
108
¥24,362

—
—
—
—
¥—

(14)
19
22
3
¥(594)

(14)
19
22
3
¥(594)

Fair value

Valuation
gain (loss)

21

Thousands of U.S. dollars
2022

Classification

Transaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
Others
Buying:U.S. dollars
YenEuro
Others
Total

Contract value(notional principal
amount)Contract value(notional principal
amount over
one year)$112,526
469,082
107,901
6,545
1,414

$—
—
—
—
—

$(2,884)
(523)
2,435
(368)
(90)

$(2,884)
(523)
2,435
(368)
(90)

15,974
18,874
1,953
1,414$735,706

—
—
—
—
$—

237
(163)
82
57
$(1,226)

237
(163)
82
57
$(1,226)

Fair value

Valuation
gain (loss)

The currency-related derivatives positions outstanding for which hedge accounting has been applied at March 31, 2022 and 2021 are as follows:
Millions of yen
2022

Method for hedge accounting

Transaction

Major
hedged item

Contract value(notional principal
amount)Contract value(notional principal
amount over
one year)¥    —

¥—

¥  —

359

—

(16)

111

—

(6)

11

—

(0)

6,185

—

349

337

—

14

7

—

0

34

—

1

43

—

(*)

12

—

(*)

82

—

(*)

81

—

(*)

7

—

(*)

¥7,276¥—¥341

Fair value

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Euro
RMB
Deferral hedge accounting

Accounts receivable

Others
Buying:U.S. dollars
Euro
RMB

Accounts payable

OthersForeign currency forward exchange contracts:
Selling:
Allocation method for foreign
currency forward exchange
contracts (Note 2(p))

Euro
Others

Accounts receivable

Buying:Euro
THB
OthersTotal

22

NAGASE Group
Consolidated Financial Statements 2022

Accounts payable

Millions of yen
2021

Method for hedge accounting

Transaction

Major
hedged item

Contract value(notional principal
amount)Contract value(notional principal
amount over
one year)

¥   —

¥—

299

—

(6)

447

—

(17)

41

—

(1)

1,423

—

78

149

—

2

0

—

0

118

—

1

10

—

(*)

0

—

(*)

4

—

(*)

155

—

(*)

116

—

(*)

62

—

(*)

¥2,829¥—¥ 56

Fair value

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Euro

Accounts receivable

RMB
Deferral hedge accounting

Others¥—

Buying:U.S. dollars
Euro

Accounts payable

RMB
OthersForeign currency forward exchange contracts:
Selling:
Euro
Allocation method for foreign
currency forward exchange
contracts (Note 2(p))

RMB

Accounts receivable

Others
Buying:Euro
THB

Accounts payable

Others
Total

Thousands of U.S. dollars
2022

Method for hedge accounting

Transaction

Major
hedged item

Contract value
Contract value(notional principal(notional principal
amount)amount over one year)

Fair value

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Euro
RMB
Deferral hedge accounting
Others
Buying:U.S. dollars
Euro
RMB
OthersForeign currency forward exchange contracts:
Selling
Euro
Allocation method for foreign
Otherscurrency forward exchange
Buying:contracts (Note 2(p))
Euro
RMB
Others
Total

Accounts receivable$     —
2,933
907
90

$—
—
—
—

$    —
(131)
(49)
(1)

Accounts payable

50,535
2,753
57
278

—
—
—
—

2,852
114
0
8

Accounts receivable

351
98

—
—

(*)
(*)

670
662
57
$59,449

—
—
—
$—

(*)
(*)
(*)
$2,786

Accounts payable(*): The fair value of foreign currency forward exchange contracts that qualify for the allocation method is included in the fair value of the underlying accounts receivable and payable.

23

The interest-related derivatives positions outstanding for which hedge accounting has been applied at March 31, 2022 and 2021 are as follows:
Millions of yen
2022

Method for hedge accounting

Transaction

Swap rates applied to underlying Interest-rate swap transactions
long-term loans(pay—fixed, receive—variable)

Hedged item

Long-term loans

Contract value(notional principal
amount)¥4,000Contract value(notional principal
amount over one year)¥—

Fair value(*)

Millions of yen
2021

Method for hedge accounting

Transaction

Swap rates applied to underlying Interest-rate swap transactions
long-term loans(pay—fixed, receive—variable)

Hedged item

Long-term loans

Contract value(notional principal
amount)¥8,000Contract value(notional principal
amount over one year)¥4,000Fair value(*)

Thousands of U.S. dollars
2022

Method for hedge accounting

Transaction

Swap rates applied to underlying Interest-rate swap transactions
long-term loans(pay—fixed, receive—variable)

Hedged item

Long-term loans

Contract value(notional principal
amount)$32,682

Contract value(notional principal
amount over one year)$—

Fair value(*)(*): Since interest-rate swap agreements are accounted for as if the interest rates applied to the swaps had originally applied to the underlying long-term loans, their fair values were included in the fair value of thelong-term loans.

20. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in selling, general and administrative expenses for the years ended March 31, 2022 and 2021 totaled ¥5,539 million($45,257 thousand) and ¥5,613 million, respectively.

21. OPERATING LEASES
Future minimum lease payments subsequent to March 31, 2022 under noncancelable operating leases are as follows:
Millions of yen

Thousands of
U.S. dollars

2023¥1,309$10,695

2024 and thereafter

8,649

70,668

Total¥9,958$81,363

Years ending March 31,

22. CONTINGENT LIABILITIESAt March 31, 2022, the Company and its consolidated subsidiaries were contingently liable as guarantors of loans of customers and other in the aggregate
amount of ¥111 million ($907 thousand).
In addition, at March 31, 2022, the Company and its consolidated subsidiaries had contingent liabilities arising from notes discounted with banks in theamount of ¥125 million ($1,021 thousand).

24

NAGASE Group
Consolidated Financial Statements 2022

23. AMOUNTS PER SHARE
Amounts per share at March 31, 2022 and 2021 and for the years then ended are as follows:
Yen

U.S. dollars

2022

Profit attributable to owners of parent:
Basic
DilutedNet assets
Cash dividends applicable to the year¥  213.46—
2,868.22
54.00

2021

2022

¥151.91—
2,670.09
46.00$ 1.74
—
23.44
0.44

Basic profit attributable to owners of parent per share has been computed based on the profit attributable to owners of parent available for distribution to theshareholders of common stock and the weighted-average number of shares of common stock outstanding during the year.
Diluted profit attributable to owners of parent per share for the years ended March 31, 2022 and 2021 has not been presented because no potentiallydilutive shares of common stock were outstanding.
Net assets per share have been computed based on the number of shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to the respective years together with the interim cash
dividends paid.
The financial data used in the computation of basic profit attributable to owners of parent per share for the years ended March 31, 2022 and 2021 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

Profit attributable to owners of parent
Profit available for distribution to shareholders of common stock
Weighted-average number of shares

2022

2021

¥25,939¥18,829$211,937

2022

25,93918,829211,937

121,522,286

123,955,784

24. CASH AND TIME DEPOSITS(a) A reconciliation of cash and time deposits in the accompanying consolidated balance sheets at March 31, 2022 and 2021 and cash and cash
equivalents in the accompanying consolidated statements of cash flows for the years then ended is as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits
Time deposits with maturities of more than three months
Cash and cash equivalents

2022

2021

¥54,211(874)¥53,336¥49,254(701)¥48,5532022$442,937(7,141)$435,787(b) Summary of assets and liabilities of companies, which were excluded from the scope of consolidation as a result of sales of shares during
the year ended March 31, 2021
1) Nagase Medicals Co., Ltd.
The following is the summary of assets and liabilities at the time of sales as well as the cost of selling the shares and income from the sales of shares associatedwith Nagase Medicals Co., Ltd. no longer being a consolidated subsidiary due to the sales of its shares for the year ended March 31, 2021.
Thousands of
U.S. dollars

Millions of yen
2021

Current assets¥   2,434$   21,985

Non-current assets

1,946

17,577

Current liabilities(2,335)(21,091)

Non-current liabilities(3,010)(27,188)

Gain on sales of shares

1,314

11,869Selling price
Collection of loans to subsidiaries
Cash and cash equivalents
Proceeds from sales of shares of subsidiaries

350

3,161

4,014

36,257(0)0¥   4,364¥   39,418

252) Nagase Logistics Co., Ltd.
The following is the summary of assets and liabilities at the time of sales as well as the cost of selling the shares and income from the sales of shares associated with Nagase Logistics Co., Ltd. which became affiliates accounted for by the equity method due to the partial sales of its shares for the year ended
March 31, 2021.
Thousands of
U.S. dollars

Millions of yen
2021

Current assets¥      859$     7,759

Non-current assets

1,810

16,349Current liabilities(2,068)(18,679)

(51)

(461)

Non-current liabilities

(82)

(741)

Gain on sales of shares

Investment account after sales of shares

1,342

12,122

Selling price

1,810

16,349Proceeds from borrowings of subsidiaries

1,870

16,891

Cash and cash equivalents
Proceeds from sales of shares of subsidiaries

(34)

(307)

¥   3,646$   32,933

25. SEGMENT INFORMATION(a) Overview of reportable segments(Change in Business Segments)
Effective from the beginning of the current fiscal year, the Electronics Segment
has been renamed the Electronics & Energy Segment, and the Mobility &Energy Segment has been renamed the Mobility Segment, in addition tochanging the names of these segments, the following business categories
were changed.
For the purpose of promoting development of new businesses, the Energy
Business Office previously classified under the Mobility & Energy Segment, as
well as the Advanced Information and Communications Project Team previouslyclassified under the Others/Corporate category, have been unified in the newly
established Information and Communication·Energy Office, classified under theElectronics & Energy Segment. In addition, for the purpose of expanding market
share and improving synergies, the fluorine business in the Specialty Chemicals
Division, which was previously classified under the Functional Materials­Segment, has been moved to the Electronics & Energy Segment.
Segment information provided for the previous consolidated fiscal year isbased on post-change classification methods.
The following describes the major products and services handled by eachreportable segment.
The Functional Materials segment is engaged in the sales of materials forpaints/inks, and adhesives, urethane materials and auxiliary materials, plastic
materials, plastic additives, industrial oil solutions, water processing raw
materials, surfactant raw materials, fluorochemicals, encapsulant materials, 5G
materials, silicone materials, environmental solutions and environment-relatedcommercial products, sintered metal filters, and more for the paints/inks,
resins, urethane foam, organic synthesis, surfactants, electronics chemicals,
communications equipment, water processing, metal processing, plastic andfilm processing, and other industries.
The Advanced Materials & Processing Segment is engaged in the sales ofdyestuffs, pigments, functional pigments, digital print processing products,
thermoplastic resins, thermosetting resins, automobile refinish paints, conductive coatings, synthetic rubber, inorganic materials, plastics products, resin
molding tools/dies, and more for the dye/additive, digital print processing
material, fiber processing, raw resin material, resin molding, functional film
and sheet, appliance and office automation device, electronics, packaging
material, construction material, and other industries.

26

NAGASE Group
Consolidated Financial Statements 2022

The Electronics & Energy Segment is engaged in the sales of formulated
epoxy resins, fluorine products, precision abrasives, semiconductor assemblymaterials and devices, adhesives and encapsulant materials, display panel
components and devices, chemical management equipment for display manufacturing processes, low-temperature/vacuum equipment, liquid state analysis
equipment, LEDs, 3D printing products, design and manufacture of storage
battery systems, solar panels, optical wireless communication equipment, andother products for the semiconductor, electronic component, AR/VR, environmental energy, 3D printing, heavy electrical and light electrical, HDD, automotive and aircraft, display, touch panel, housing, lighting, storage battery,energy, renewable energy, security device, large-scale commercial facility, andother industries. Its main services include energy management system proposals, battery assessments, and health care services.
The Mobility Segment is engaged in the sales of plastic products in general, materials for secondary batteries, interior and exterior materials andcomponents, materials for functional components, products for electrification,
sensor components, in-vehicle electronics products, in-vehicle display-related
components, self-driving-related products, and other products for the overall
mobility industry and related industries.
The Life & Healthcare segment is engaged in the sale of pharmaceutical/
agricultural chemicals and materials, research products, in vitro diagnostics,
enzymes, food additives, food ingredients, sports nutrition products, nutrient
premixes, additives for cosmetics, feeds, surfactants, and medical appliances
for the pharmaceutical, food and beverage, cosmetics, agricultural, toiletries,
and health care industries. The segment offers radiation measurement as oneof its main services. In addition, this segment sells cosmetics, health foods,
and beauty foods directly to consumers.
(Application of Accounting Standards for Revenue Recognition)
As described in (Accounting Changes), at the beginning of the current consolidated fiscal year, the Company adopted the Accounting Standard for Revenue
Recognition (ASBJ Statement No. 29, March 31, 2020), changing its accounting method for revenue recognition. As a result, measurement methods have
similarly been changed for business segment profit and loss.
Segment information provided for the previous consolidated fiscal year isbased on the changed profit or loss measurement method.

(b) Calculation methods of net sales, income or loss, assets, and other items by reportable segments
The accounting policies of reportable segments are generally identical to those described in Note 2. Reportable segment income corresponds to operating incomein the consolidated statements of income. Intersegment internal income and transfers are determined based on the values of transactions at actual market prices.
(c) Information on net sales, income or loss, assets and other items for each reportable segment
Information by reportable segments for the year ended March 31, 2022 and 2021 are as follows:
Millions of yen
2022
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics

Mobility &EnergyLife &
Healthcare

Total¥ 99,874¥257,283¥128,131¥103,389¥191,634¥780,313

711

777

2,319

2,389

452

6,649

100,585

258,060

130,450

105,778

192,087

Segment income

7,823

10,858

10,2784,131

Segment assets

83,793

164,249

77,163465

1,447

Amortization of goodwill

111

Unamortized balance of goodwill

1,853

Investments in affiliates accounted forby the equity method
Increase in property, plant and equipment,
net and intangible assets

Sales to customers
Intersegment sales and transfers
Net sales

Others

Total

Corporate

Adjustments

Consolidated¥  244¥780,557¥      —

¥      —

¥780,557

4,649

11,298—(11,298)—

786,962

4,893

791,856—(11,298)

780,557

9,429

42,521

100

42,621(7,690)331

35,26368,492

218,060

611,759

2,838

614,598

190,048(64,926)

739,720

1,479

342

5,959

9,694

16

9,711

1,505

—

11,216

178

42

—

2,145

2,478

—

2,478

—

—

2,478

—

452

—

27,18629,492—29,492——29,492

1,300

1,828

2,761

1,403

3,139

10,432

95

10,528—(0)

10,528

562

1,742

1,610

558

2,435

6,909

25

6,934

3,791

—

10,725

Other items:
Depreciation and amortization other thanamortization of goodwill

Millions of yen
2021
Reportable Segments

Sales to customers
Intersegment sales and transfers
Net sales
Segment income
Segment assets
Other items:
Depreciation and amortization other thanamortization of goodwill
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted forby the equity method
Increase in property, plant and equipment,
net and intangible assets

Functional
Materials

Advanced
Materials &Processing

Electronics

Mobility &EnergyLife & Healthcare

Total

Others

Total

Corporate

Adjustments

Consolidated¥75,294680
75,974
4,712
79,048¥209,715
1,546
211,262
7,311
144,135¥110,770
1,951
112,722
8,408
69,326¥78,783
2,069
80,853
1,851
53,659¥150,331
328
150,659
6,512
165,934¥624,895
6,577
631,472
28,795512,104¥  349
5,059
5,408
157
2,738

¥625,245
11,636
636,881
28,952514,843¥     ———
(7,479)160,510¥    —(11,636)(11,636)443(34,766)¥625,245—
625,245
21,916
640,587

472
105
1,787

1,040
89
720

1,496
40
451

280
—
—

5,788
2,108
27,257

9,077
2,344
30,216

104
—
—

9,181
2,344
30,216

1,827
—
—

—
—
—

11,0082,344
30,216

1,981

1,728

3,170

1,237

2,995

11,11382

11,196—(1)

11,195

399

1,974

1,222

242

5,744

9,583

11

9,595

1,160

—

10,75527

Thousands of U.S. dollars
2022
Reportable Segments
Functional
Materials

Sales to customers
Intersegment sales and transfers
Net sales
Segment income
Segment assets
Other items:
Depreciation and amortization other thanamortization of goodwill
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted for by
the equity method
Increase in property, plant and equipment,
net and intangible assets

Advanced
Materials &Processing

Electronics$816,031 $2,102,157 $1,046,907
5,809
6,349
18,948821,840 2,108,506 1,065,855
63,91988,716
71,460684,639 1,342,013
630,468

Mobility &EnergyLife & Healthcare

Total$844,750 $1,565,765 $6,375,627
19,5203,693
54,326864,270 1,569,466 6,429,953
12,60753,207
236,964
559,621 1,781,682 4,998,439

Others

Total

Corporate

Adjustments$ 1,994 $6,377,621 $       —37,98592,311—
39,979 6,469,940—
1,283
238,255(63,428)
23,188 5,021,636 1,552,807

Consolidated$    — $6,377,621——— 6,377,621
4,241
179,067— 6,043,958

3,799
907
15,14011,823
1,454—

12,084
343
3,693

2,794
—
—

48,68917,526
222,126

79,206
20,247240,967131——

79,345
20,247240,967

12,297—————91,641
20,247240,967

10,622

14,93622,55911,46325,64885,236776

86,020——86,0204,592

14,233

13,155

4,559

19,89556,451

204

56,65530,975—87,630(d) Geographical information
Net sales by country or region for the years ended March 31, 2022 and 2021 are summarized as follows:
Millions of yen
2022
Reportable Segments

Japan
Greater China
ASEAN
Americas
EuropeOther
Revenues from contracts with customers
Net sales to customers

Functional
Materials

Advanced
Materials &Processing

Electronics &EnergyMobilityLife &
Healthcare¥40,971
11,987
26,58016,703
2,634
996
99,874
99,874¥ 69,123
117,092
58,949
6,172
4,598
1,347
257,283
257,283¥ 50,640
54,354
7,267
5,221
4,071
6,575
128,131
128,131¥ 31,555
30,534
29,416
10,2491,466
167
103,389
103,389¥ 57,825
3,594
3,493
79,24347,083394
191,634
191,634

Others(Note) 3

¥244
—
—
—
—
—
244
244

Total

¥250,360
217,562
125,707
117,589
59,855
9,481
780,557
780,557

Composition (%)

32.1
27.9
16.1
15.1
7.7
1.1
100.0
100.0

Millions of yen
2021
Reportable Segments
Functional
Materials

Japan
Greater China
ASEAN
Americas
EuropeOther
Revenues from contracts with customers
Net sales to customers

28

NAGASE Group
Consolidated Financial Statements 2022

¥31,951
9,741
19,132
12,331
1,600
537
75,29475,294

Advanced
Materials &Processing

Electronics &Energy¥ 60,837
93,58145,756
3,760
4,622
1,156
209,715
209,715¥ 51,014
40,298
7,158
4,834
2,870
4,595
110,770
110,770

MobilityLife &
Healthcare¥24,258
25,771
20,692
6,877
1,043
139
78,78378,783¥ 53,326
2,677
2,887
58,40132,722316
150,331150,331

Others(Note) 3

¥349
—
—
—
—
—
349
349

Total

¥221,737
172,071
95,626
86,20442,8596,745
625,245625,245

Composition (%)

35.5
27.5
15.3
13.8
6.9
1.0
100 .0100 .0Thousands of U.S. dollars
2022
Reportable Segments
Functional
Materials

Japan
Greater China
ASEAN
Americas
EuropeOther
Revenues from contracts with customers
Net sales to customers

Advanced
Materials &Processing

Electronics &EnergyLife &
Healthcare

Mobility$334,758 $  564,777 $  413,759
97,941
956,712444,105
217,175
481,649
59,376
136,474
50,42942,65921,521
37,56833,2638,138
11,00653,722816,031 2,102,157 1,046,907
816,031 2,102,157 1,046,907

Others(Note) 3$257,823 $  472,465
249,481
29,365
240,346
28,54083,741
647,463
11,978384,696
1,364
3,219
844,750 1,565,765
844,750 1,565,765

Total

Composition (%)$1,994 $2,045,592— 1,777,613— 1,027,102—
960,773—
489,051—
77,465
1,994 6,377,621
1,994 6,377,621

32.1
27.9
16.1
15.1
7.7
1.1
100 .0100 .0Notes:
1. Net sales are categorized by country or region, according to the location of the customer.
2. Major countries and regions in each category other than Japan(1) Greater China China, Hong Kong, Taiwan(2) ASEAN
Thailand, Vietnam, Singapore(3) Americas
U.S., Mexico(4) Europe
U.K., Germany(5) OtherKorea
3. “Others” is a business segment consisting of businesses not included in Reportable Segments, and includes information processing services, and professional service. Logistics services were also included in 2021.

Information of major customers not presented here, since no single customer accounts for 10% or more of consolidated net sales.
Property, plant and equipment by country or region as of March 31, 2022 and 2021 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Japan
Other
Total

2022

2021

¥62,185
10,369¥72,554¥61,846
9,050¥70,8962022$508,089
84,721$592,810(e) Information on loss on impairment of fixed assets per reportable segments
Loss on impairment of fixed assets for the years ended March 31, 2022 and 2021 is as follows:
Millions of yen
2022
Reportable Segments

Loss on impairment of fixed assets

Functional
Materials

Advanced
Materials &Processing

Electronics &Energy¥—¥2,974¥—

Mobility¥—Life &
Healthcare

¥—

Total

¥2,974

Others¥—Eliminations or
corporate

¥—

Total

¥2,974The Company no longer expects the profitability originally anticipated for the product and manufacturing process development business related to resins in the
Advanced Materials & Processing segment. Therefore, the Company has written down the book value of goodwill and other intangible fixed assets related to thisbusiness to their recoverable amounts, recording impairment losses in the amount of ¥2,911 million ($23,785 thousand).

29

Millions of yen
2021
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics &Energy

¥—

¥843

¥973

Loss on impairment of fixed assets

MobilityLife &
Healthcare

¥—

Total

¥—

Eliminations or
corporate

Others¥1,817

¥—

¥7

Total

¥1,824Due to decreasing profitability, the carrying values of the assets for the color former manufacturing business in the Advanced Materials & Processing segment
were reduced to their recoverable amounts and impairment losses of ¥843 million ($7,614 thousand) were recognized.
With respect to the assets for polyimide film glass bonding business in the Electronics & Energy segment, which are held by a subsidiary in Taiwan, estimatedfuture cash flows were less than their book values. As a result, the carrying values of these assets were reduced to their recoverable amounts and impairment
losses of ¥951 million ($8,590 thousand) were recognized.
Thousands of U.S. dollars
2022
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics &Energy$—$24,299$—

Loss on impairment of fixed assets

MobilityLife &
Healthcare

$—

$—

Total

Eliminations or
corporate

Others$24,299

$—

$—

Total

$24,299

26. RELATED PARTY TRANSACTION
A consolidated subsidiary of the Company recorded the following transaction with a related party for the year ended March 31, 2022 and 2021:

Name of related party

315 Fullerton LLC*1

Relationship with the related party

Description of
the transaction

A director of a consolidated subsidiary of Rental of real
the Company owns a majority of theestate*2
voting rights of the company.

Thousands of
U.S. dollars

Millions of yen
Account

Rent payment forreal estate

Total

2022

2021

2022

¥36

¥34

$294

¥36

¥34

$294

*1 Mr. Donald K. Thorp, a director of Prinova Group, LLC, which is a consolidated subsidiary of the Company, owns 77% of the voting rights.
*2 Rent is determined taking the transactions in the neighboring area into consideration.

27. SUBSEQUENT EVENTSThe following distribution of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial statements for the year
ended March 31, 2022, was approved at a meeting of the shareholders held on June 20, 2022:

Cash dividends (¥30.0 = U.S.$0.25 per share)

30

NAGASE Group
Consolidated Financial Statements 2022

Millions of yen

Thousands of
U.S. dollars¥3,600$29,414

Independent Auditor’s Report

31

32

NAGASE Group
Consolidated Financial Statements 2022

33

34

NAGASE Group
Consolidated Financial Statements 2022

Osaka Head Office:1-1-17, Shinmachi, Nishi-ku, Osaka City,
Osaka 550-8668, Japan
Tel: (81) 6-6535-2114
Tokyo Head Office:Tokiwabashi Tower, 2-6-4, Otemachi, Chiyoda-ku,
Tokyo 100-8142, Japan
Tel: (81) 3-3665-3021
Nagoya Branch Office:3-14-18, Marunouchi, Naka-ku, Nagoya City,
Aichi 460-8560, Japan
Tel: (81) 52-963-5615
https://www.nagase.co.jp/english/

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