TAKUMA CO., LTD. and Subsidiaries

Consolidated Financial Statements
For the Years ended March 31,
2023 and 2022
Together with Independent
Auditor’s Report

KPMG AZSA LLC
June 2023

Independent auditor’s report
To the Board of Directors of TAKUMA Co., Ltd.:
OpinionWe have audited the accompanying consolidated financial statements of TAKUMA Co., Ltd. (“theCompany”) and its consolidated subsidiaries (collectively referred to as “the Group”), which comprisethe consolidated balance sheets as at March 31, 2023 and 2022, the consolidated statements ofoperations, statements of comprehensive income, statements of changes in net assets and statements ofcash flows for the years then ended, and notes, comprising a summary of significant accounting
policies, other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2023 and 2022, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Reasonableness of the estimate of provision for loss on construction contracts in the Domestic
Environment and Energy business
The key audit matter
A provision for loss on construction
contracts of \625 million was recognized in
the consolidated balance sheet of Takuma Co,
Ltd. (the “Company”) and its consolidated

How the matter was addressed in our audit
The primary procedures we performed to assess thereasonableness of the estimate of provision for loss on
construction contracts in the Domestic Environment andEnergy business included the following:subsidiaries (the “Group”) for the fiscal year
ended March 31, 2023.
In order to account for the possibility oflosses on contracted work, the Group posts a
provision for loss on construction contracts it
expects to sustain during or after the next
consolidated fiscal year in the event it
determines that estimated construction costs
for contracts included in the order backlog at
the end of the current fiscal year will
significantly exceed the value of underlying
orders. In providing a provision for loss on
construction contracts, total construction costs
to be incurred in the future should bereasonably estimated at the end of the fiscal
year.
Core businesses of the Domestic
Environment and Energy business, for whicha provision for loss on construction contracts
was recognized, include construction ofmunicipal solid waste/sewage treatment
plants and industrial biomass power
generation plants (EPC business), and aftersales
servicesforthemincludingmaintenance, operational management, andoperation. The estimate of total construction
costs for projects in the Domestic
Environment and Energy business includes
assumptions of possible material effects on
the estimate of total construction costs
involving a high degree of uncertainty as
following:Conditions and specifications forconstruction of new plants and after-sales
services for them are different in eachproject. As some projects need long timefrom receiving orders to the completionof delivery and after-services, there may
be a time lag between the timing of
estimating total construction costs andreceiving orders. Therefore, changes in
economic situations during the time
could lead to changes in prices ofnecessary materials or construction costs.
Additional expenses will incur when
deficiency in performance, late delivery
or material accidents that may cause
injuries/property damage happen due to(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls relevant to
the estimation of provision for loss on construction
contracts.
In this assessment, we focused on the Company’s
internal controls to ensure completeness of items to beaggregated and other reasonableness in estimating total
construction costs.
(2) Assessment of the reasonableness of the estimate ofprovision for loss on construction contracts
To assess the reasonableness of the estimate ofprovision for loss on construction contracts, we:

identified projects of which estimate of total
construction costs involved a relatively high levelof uncertainty based on our understanding of termsof construction outsourcing agreements; details of
the projects; cost structure; and conditions for
estimate of total construction costs;

compared total construction costs with actual costsof past similar projects in the business to which
projects we identified belonged, and assessed theirvariances and the accuracy of the estimate of past
total construction costs;inquired of the personnel responsible for the project
about the progress toward completion of theconstruction we identified, including their
judgment as to whether the total construction costs
should be updated considering the status of theconsumption of the project budget, and inspectedmaterials that served as the basis for their responses
to our inquiries;compared total construction costs of the identified
construction projects with underlying documents ofpurchase orders and worksheets to calculate costs
to assess the appropriateness of the assumption of
the total construction costs; andwith respect to the construction projects where
total construction costs were updated, inspected
approval documents for updating the total
construction costs and evidence of the estimation,and inquired of the personnel responsible for the
projects to challenge the appropriateness of theassumption of the updates of the total construction
costs from a professional viewpoint.

problems in designs or construction
works.
We, therefore, determined that ourassessment of the reasonableness of theestimate of provision for loss on construction
contracts in the Domestic Environment andEnergy business was the most significant in
our audit of the consolidated financial
statements for the current fiscal year, andaccordingly, a key audit matter.

Other Information
The other information comprises the information included in the disclosure documents that contain or
accompany the audited financial statements, but does not include the financial statements and our
auditor’s report thereon.
We do not perform any work on the other information as we determine such information does not exist.
Responsibilities of Management and the Audit and supervisory committee for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
The audit and supervisory committee is responsible for overseeing the directors’ performance of theirduties with regard to the design, implementation and maintenance of the Group’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.



Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with the audit and supervisory committee regarding, among other matters, theplanned scope and timing of the audit, significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide corporate auditors and the audit and supervisory committee with a statement that wehave complied with relevant ethical requirements regarding independence, and communicate with them
all relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
From the matters communicated with corporate auditors and the audit and supervisory committee, we
determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2023 are presented solely for convenience. Our audit also included the translation of
yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 1 to the consolidated financial statements.

TAKUMA CO., LTD. and Consolidated Subsidiaries
FINANCIAL HIGHLIGHTS(Years Ended March 31, 2023 and 2022)
Millions of yen
2023
For the year:
Net sales
Operating profit
Ordinary income
Profit before income taxes
Profit attributable to owners of parent
As of year-end:
Total assets
Total net assets
Per share data:
ProfitDiluted profit
Net assets
Cash dividends applicable to the year

¥

2022

142,652
13,814
14,684
14,103
9,622¥

179,689
101,168

134,093
9,929
10,647
10,789
7,435$

174,536
94,355

1,345,682
757,641
U.S. dollars
$
0.90
9.42
0.32

Yen
¥

120.22
1,258.24
43.00¥

Thousands of
U.S. dollars
2023

91.53
1,162.87
36.00

1,068,311
103,449
109,969
105,615
72,058

Note: 1. U.S. dollar amounts are shown solely for the convenience of readers and are translated at the rate of \133.53 to U.S.$1.00,
the exchange rate prevailing at March 31, 2023.
2. Ordinary income is a measure of accounting profit that equals operating profit plus other income minus other expenses,
except for extraordinary items under Japanese GAAP.

Consolidated Balance Sheets
TAKUMA CO., LTD. and Consolidated Subsidiaries
As of March 31, 2023 and 2022
Millions of yen
ASSETS
Current assets:
Cash and deposits (Notes 4 and 6)
Notes and accounts receivable
Notes receivable – trade
Accounts receivable – trade
Contract assets
Unconsolidated subsidiaries
and affiliated companies
Other
Allowance for doubtful accounts
Total
Inventories (Note 5)
Other
Total current assets

2023¥

Property, plant and equipment:
Land
Buildings and structures
Machinery, equipment, ｌease assets and construction in progress
Less accumulated depreciation
Total property, plant and equipment
Investments and other assets:
Investment securities (Notes 6 and 7)
Investments in:
Unconsolidated subsidiaries
and affiliated companies
Other
Allowance for doubtful accounts
Total
Deferred tax assets (Note 15)
Net defined benefit asset
Other
Total investments and other assets

Total assets

See accompanying notes.

¥

65,2432022¥

42,979Thousands of
U.S. dollars(Note 1)
2023$

488,600

3,175
32,82924,371

3,066
30,54648,18523,780245,852
182,515

507
188
(16)
61,054
6,012
1,941
134,250

393
140
(16)
82,314
4,605
4,418
134,316

3,795
1,408
(117)
457,233
45,022
14,533
1,005,388

2,605
19,028
13,68535,318(16,882)
18,4362,394
13,74314,09130,228(17,881)
12,347

19,509142,500
102,489
264,498(126,429)
138,069

16,274

14,485

121,877

2,255
3,872
(136)
5,991
4,160
38
540
27,003

3,250
5,188
(135)
8,303
4,748
39
298
27,873

16,88828,993(1,015)44,86631,153284
4,045
202,225

179,689¥

174,536$

1,345,682

Thousands of
U.S. dollars(Note 1)
2023

Millions of yen
LIABILITIES AND NET ASSETS
Current liabilities:
Short-term loans payable (Notes 6 and 9)
Current portion of long-term borrowings (Notes 6 and 9)
Notes and accounts payable (Note 6):
Trade
Unconsolidated subsidiaries
and affiliated companies
Other
Total
Income taxes payable
Contract liabilities
Provision for product warranties
Provision for loss on construction contracts
Other
Total current liabilities

2023
¥

2022
220
-

¥

220
80

$

1,648
-

41,07849,260307,630

291
1,623
42,992
3,363
11,059
216
626
8,365
66,841316
2,337
51,913
501
8,669
53
1,517
5,751
68,704

2,186
12,153321,969
25,184
82,822
1,614
4,685
62,646
500,568

267
10,980433
11,68078,521

246
10,792439
11,47780,181

1,998
82,232
3,243
87,473
588,041

13,367

13,367100,108

3,874
82,046(3,917)3,872
75,508(2,765)29,008614,437(29,331)

95,370
5,227
49
92
(138)
5,230
568

89,982
3,957
110
80
(220)
3,927
446

714,222
39,148366
687(1,035)
39,166
4,253

101,168

94,355

757,641

Non-current liabilities:
Provision for retirement benefits for directors (and other officers)
Retirement benefit liability (Note 10)
Other
Total non-current liabilities
Total liabilities
Contingent liabilities (Note 11)
Net assets (Note 12):
Share capital
Authorized: 321,840,000 shares
Issued: 83,000,000 shares
Capital surplus
Retained earnings
Treasury shares
3,047,184 shares in 2023 and2,243,777 shares in 2022
Total shareholders' equity
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Liabilities and net assets

See accompanying notes.

¥

179,689¥

174,536$

1,345,682

Consolidated Statements of Operations
TAKUMA CO., LTD. and Consolidated Subsidiaries
For tｈe years ended Marcｈ 31, 2023 and 2022

Net sales (Note 18)
Cost of sales (Notes 10, 13, 14 and 18)
Gross profit
Selling, general and administrative expenses (Notes 10, 14 and 18)
Operating profit (Note 18)
Otｈer income (expenses):
Interest and dividend income
Interest expenses
Gain on sales of investment securities (Note 7)
Loss on valuation of investment securities
Commitment fees
Loss on disposal of non-current assets
Share of profit of entities accounted for using equity method
Insurance claim income
New factory construction expenses
Otｈer, net
Otｈer
Otｈerincome
expenses,(expenses),
net
net

¥

Millions of yen
2023
2022
142,652¥
134,093
111,097
107,91031,55526,183
17,741
16,254
13,814
9,929

Tｈousands of
U.S. dollars(Note 1)2023$
1,068,311
831,997
236,314132,865
103,449

570
(3)
195
(178)
(28)
(20)
145
(599)
207
289

453
(5)
197
(22)
(46)
(66)
179
300
(355)
225
860

4,266
(21)
1,461
(1,331)
(213)
(150)
1,087
(4,485)
1,552
2,166

Profit before income taxes
Income taxes (Note 15):
Current
Deferred
Total income taxes

14,103

10,789105,615

4,412
9
4,421

618
2,697
3,315

33,041
64
33,105

Profit

9,682

7,474

72,510

60

39

452

Profit attributable to non-controlling interests
in consolidated subsidiaries
Profit attributable to owners of parent

¥

9,622

¥

Yen
Per sｈare:
ProfitDiluted profit
Casｈ dividends applicable to tｈe year
See accompanying notes.

¥

120.22
43.00

7,435

$

U.S. dollars(Note 1)

Yen¥

72,058

91.53
36.00

$

0.90
0.32

Consolidated Statements of Comprehensive Income
TAKUMA CO., LTD. and Consolidated Subsidiaries
For tｈe years ended Marcｈ 31, 2023 and 2022
Thousands of
U.S. dollars(Note 1)
2023

Millions of yen
2023
ProfitOther comprehensive income：
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income (Note 17)
Comprehensive income attributed to:
Owners of the parent
Non-controlling interests
See accompanying notes.

2022

¥

9,682

¥

1,271
(62)
16
82
1,307
10,989¥10,925
64

¥

7,474

¥

(505)
74
68
136
(227)
7,247

¥

7,189
58

$

72,510

$

9,519
(462)
119
612
9,788
82,298$81,817481

Consolidated Statements of Changes in Net Assets
TAKUMA CO., LTD. and Consolidated Subsidiaries
For tｈe years ended Marcｈ 31, 2023 and 2022
Millions of yen

SharecapitalFor the year ended March 31, 2023
Balance at the beginning of current period
Cash dividends (\43.00 per share)
Profit attributable to owners of parent
Change in scope of consolidation
Purchase of treasury shares
Disposal of treasury shares
Other changes during the year, net
Balance at the end of current period

For the year ended March 31, 2022
Balance at the beginning of current period
Cash dividends (\36.00 per share)
Profit attributable to owners of parent
Change in scope of consolidation
Purchase of treasury shares
Disposal of treasury shares
Other changes during the year, net
Balance at the end of current period

For the year ended March 31, 2023
Balance at the beginning of current period
Cash dividends ($0.32 per share)
Profit attributable to owners of parent
Change in scope of consolidation
Purchase of treasury shares
Disposal of treasury shares
Other changes during the year, net
Balance at the end of current period

See accompanying notes.

¥

CapitalsurplusRetainedearnings

13,367 ¥13,367 ¥

3,872
2
3,874

¥

13,367 ¥13,367 ¥

3,841
31
3,872

¥

$ 100,108 $$ 100,108 $

28,997
11
29,008$ 565,474(22,263)
72,058(832)$ 614,437

¥

¥

¥

¥

¥

TreasurysharesForeign
Total
Valuation
Deferredcurrency Remeasure- accumulated
Total
difference on gains and losses translation
ments ofother
Nonshareholders' available-foron
adjustdefined comprehensive controlling
equitysale securities
hedgesments
benefit plansincomeinterests

75,508 ¥(2,973)9,622(111)
82,046 ¥(2,765)(1,253)101(3,917)¥70,851 ¥(2,925)7,435
147
75,508 ¥(2,088)(747)
70(2,765)¥$$(20,709)(9,380)758(29,331)

110 ¥
(61)
49 ¥

80
12
92

¥

36
74
110

¥

¥

30
50
80

Thousands of U.S. dollars (Note 1)$ 673,870$ 29,631$
828 $(22,263)
72,058(832)(9,380)
769
9,517
(462)
$ 714,222$ 39,148
$
366 $

596
91
687

$

¥

¥

89,982(2,973)9,622(111)(1,253)
103
95,370¥85,971(2,925)
7,435
147
(747)
101
89,982

¥

¥

¥

3,957
1,270
5,227

¥

4,462
(505)
3,957

¥

¥

¥

¥

¥

¥

$

(220)
82
(138)

¥

(356)
136
(220)

¥

(1,648)613(1,035)

$

¥

¥

$

3,927
1,303
5,230

¥

¥

446
122
568

4,172 ¥
(245)
3,927 ¥

412
34
446

¥

3,338
915
4,253

$

29,407
9,759
39,166

¥

Total
net
assets

$

$

¥

¥

$

94,355(2,973)9,622(111)(1,253)
103
1,425
101,168

90,555(2,925)
7,435
147
(747)
101
(211)
94,355

706,615(22,263)
72,058(832)(9,380)769
10,674
757,641

Consolidated Statements of Cash Flows
TAKUMA CO., LTD. and Consolidated Subsidiaries
For tｈe years ended Marcｈ 31, 2023 and 2022
Millions of yen
2023
Cash flows from operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes
to net cash provided by (used in) operating activities:
Depreciation
Loss (gain) on sale of investment securities
Loss (gain) on valuation of investment securities
Loss (gain) on disposal of non-current assets
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for loss on construction contracts
Increase (decrease) in provision for loss on liquidation of subsidiaries and associates
Increase (decrease) in retirement benefit liability
Interest and dividend income
Interest expenses
Share of loss (profit) of entities accounted for using equity method
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in other current assets
Increase (decrease) in trade payables
Increase (decrease) in other current liabilities
Other
SubtotalInterest and dividends received
Interest paid
Income taxes refund (paid)
Net cash provided by (used in) operating activities¥

14,1032022¥

10,789Thousands of
U.S. dollars(Note 1)
2023$

105,615

1,136
(195)
178
20
413
(891)
306
(570)
3
(145)
23,796(1,380)701(10,990)
2,618
2,228
31,331619(3)245
32,192

962
(197)
22
66
8
(2,430)(1,003)
536
(453)
5
(179)
1,458
(138)
(108)
3,746
(2,633)
2,669
13,120522(8)(4,634)
9,000

8,508
(1,461)
1,331
150
3,094
(6,673)
2,295(4,265)21(1,087)
178,206(10,333)
5,249(82,307)
19,61016,683
234,636
4,636
(22)
1,833
241,083

Cash flows from investing activities:
Net decrease (increase) in time deposits
Purchase of property, plant and equipment
Sale of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sale of investment securities
Loan advances
Collection of loans receivable
Other
Net cash provided by (used in) investing activities

411(5,809)
99
(101)
(323)
390
51
(323)
(5,605)(246)(1,510)
117
(61)
(353)
377
(611)
171
(279)
(2,395)

3,080(43,500)
740(758)(2,419)2,923
378(2,417)(41,973)

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings
Purchase of treasury shares
Dividends paid
Dividends paid to non-controlling interests
Other
Net cash provided by (used in) financing activities(80)(1,253)(2,973)(32)
57(4,281)(5,200)(182)(747)(2,925)(25)(33)(9,112)(599)(9,380)(22,263)(240)
426(32,056)

Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting from change in scope of consolidation
Cash and cash equivalents at end of period (Note 4)17
22,323
41,244345
63,91246(2,461)
42,958
747
41,244

125
167,179
308,878
2,575
478,632

See accompanying notes.

¥

¥

$

Notes to Consolidated Financial Statements

TAKUMA CO., LTD. and Consolidated Subsidiaries

1. Basis of presenting financial statements
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Law and its related accounting regulations and in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as to application and disclosure requirements from International Financial
Reporting Standards.
The accounts of overseas subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting
principles prevailing in the respective countries of domicile. However, necessary adjustments are made upon consolidation. The
accompanying consolidated financial statements have been restructured and translated into English from the consolidated financial
statements of TAKUMA CO., LTD. (the “Company”) prepared in accordance with Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as required by the Japanese Financial Instruments and Exchange Law. Some supplementary
information included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2023, which was \133.53 to U.S.$1.00. The translations should not be construed as
representations that the Japanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or
any other rate of exchange.

2. Summary of significant accounting policies(1) Principles of consolidation
The consolidated financial statements include the accounts of the Company and its 37 significant subsidiaries (the “Companies”).
TechnoLinks Co., Ltd., which was unconsolidated subsidiaries, has been included in the consolidation from the consolidated fiscal year
ended March 31, 2023 because of the increased significance. Okinoshima High Trust Co., Ltd., and Kohoku High Trust Co., Ltd., whichwere newly established subsidiaries, have also been included in the consolidation from the consolidated fiscal year ended March 31, 2023.
All significant intercompany transactions and unrealized profits among the Companies have been eliminated in consolidation. Investments
in certain significant affiliates over which the Company and/or its subsidiaries are able to exert influence to a material degree with regard
to financial and operating decision making, other than consolidated subsidiaries, are accounted for by the equity method after theelimination of unrealized intercompany profits.
Investments in the remaining unconsolidated subsidiaries and affiliated companies are not accounted for by the equity method because of
the immaterial effect on the consolidated financial statements. Therefore, such investments are carried at cost, adjusted for any substantial
and non-recoverable decline in value. Income from those unconsolidated subsidiaries and affiliated companies is recognized only when the
Companies receive dividends therefrom.
(2) Foreign currency translation
Revenue and expense are translated at the rates of exchange prevailing on the transaction date. Assets and liabilities denominated inforeign currencies are generally translated at the rate of exchange prevailing at the balance sheet date, and the resulting translation gains
and losses are included in earnings.
The financial statements of a consolidated overseas subsidiary are translated into Japanese yen at the year-end rate, except that net asset
accounts are translated at historical rates and income statement items resulting from transactions with the Company are translated at
rates used by the Company. The resulting translation adjustments are shown as “Foreign currency translation adjustment,” a separate
component of net assets.
(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash and cash equivalents include cash on hand, readily available deposits andshort-term investments with maturities not exceeding three months from the date of acquisition and which have high liquidity and low riskof price fluctuation.
(4) Securities
Equity securities issued by subsidiaries and affiliated companies which are not consolidated or accounted for using the equity method arestated at cost determined by moving average cost. Available-for-sale securities with available fair market value are stated at fair market
value, and unrealized gains and losses on these securities are reported net of applicable income taxes as a separate component of net
assets. Realized gains and losses on the sale of such securities are computed at cost using moving average cost. Available-for-salesecurities with no available fair market value are stated at cost determined by moving average cost.
If the market value of equity securities issued by unconsolidated subsidiaries and affiliated companies or available-for-sale securities
declines significantly, such securities are stated at fair market value and the difference between fair market value and the carrying amountis recognized as a loss in the period of the decline. If the fair market value of such securities is not readily available, such securities should
be written down to net asset value with a corresponding charge in the income statement in the event the net asset value declines
significantly. In these cases, the fair market value or the net asset value will be the carrying amount of the securities at the beginning of
the next year.

(5) Allowance for doubtful accounts
The Companies provide an allowance for doubtful accounts by estimating the uncollectible amounts of certain individual accounts and by
applying a percentage based on collection experience to the remaining receivables.
(6) Inventories
Merchandise and finished goods are stated at cost using the moving average method. Work-in-process is stated at cost determined by theidentified cost method. Materials and supplies are stated at cost using the average method. For these inventories, the carrying amounts
on the balance sheet are written down to reflect decreases in profitability.
(7) Property, plant and equipment
Property, plant and equipment are depreciated principally using the declining balance method over the estimated useful life of the asset.
However, buildings acquired after March 31, 1998 and facilities attached to buildings and structures acquired after March 31, 2016 aredepreciated using the straight-line method. The range of useful lives is principally from 3 to 60 years for buildings and structures and from
2 to 20 years for machinery, equipment and other. Maintenance and repairs, including minor renewals and improvements, are charged toincome as incurred.
Lease assets under finance leases in which the ownership of the lease assets is not transferred to the lessee are depreciated using thestraight-line method over the lease term with an assumption of no residual value.
(8) Provision for loss on construction contracts
For sales orders on hand at the balance sheet date for projects in which the estimated cost is expected to exceed the price of the orderby a wide margin, a provision for loss on construction contracts is recognized at the estimated aggregate amount.
(9) Provision for product warranties
Provision for product warranties is based on estimated amounts of expenditure in the warranty period after products are delivered.
(10) Provision for retirement benefits for directors (and other officers)
Directors are generally entitled to receive retirement benefits based on the Companies’ internal rules. The Companies provide an allowancefor directors’ retirement benefits based on the amount that would be required if all directors retired at the balance sheet date.
(11) Retirement benefit liability
In calculating retirement benefit obligations, the method of attributing expected benefits to periods employs principally a benefit formulabasis. Actuarial gains and losses are recognized in expenses using the straight-line method principally over 10 years commencing with thefollowing period. Prior service costs are recognized in expenses using the straight-line method principally over 10 years.
(12) Revenue recognition
For construction contracts, that met one of the following criteria, it is determined that the performance obligations in such contracts are
satisfied over time. The progress rate for fulfillment of the performance obligation is estimated and revenue is recognized based on the
progress, rate over time.
I. By fulfilling the obligations in the contract with the customer, the asset arises or the value of the asset increases and the customer
obtains control of the asset as the asset arises or the value of the asset increases,
II. By fulfilling obligations in a contract with a customer, the asset that cannot be diverted to another use arises, and also the company
has the enforceable right to receive compensation for the portion of the contract with the customer that has fulfilled its obligations.
Estimates of the progress is measured on the basis of the construction costs incurred by the end of each reporting period relative to thetotal expected construction costs. However, adopting alternative treatment, for construction contracts for which the period from thecommencement date of the contract to the date when it is expected that the performance obligation will be fully satisfied is very short,revenue is not recognized over a certain period of time, and revenue is recognized at the time the performance obligation is judged to besatisfied. Incidentally, the consideration for the transaction is mainly received in stages during the contract period separately from thefulfillment of the performance obligation, and the remaining amount is received within approximately one year after all the performanceobligations are satisfied, and the important financial factor is not included.
For Operation control and O&M contracts, the customer receives the benefits as we fulfill the obligations in the contract with the customer,
therefore it is determined that the performance obligations in such contracts are satisfied over time. Since we have the right to receivefrom the customer the amount of consideration that directly corresponds to the value to the customer for the portion that has been fulfilled
so far, we recognize the revenue by the amount that we have the right to claim.
Incidentally, the consideration for the transaction is received within approximately one year after the performance obligation is satisfied,and does not include important financial factors.
(13) Income taxes
The Companies are subject to corporation tax, inhabitants tax and enterprise tax based on taxable income. The Companies recognize thetax effects of the temporary differences between the carrying amounts of assets and liabilities for tax and financial reporting. The provision
for income taxes is computed based on the pretax income of each of the Companies, with certain required adjustments. The asset-liability
approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences.
The Companies have adopted the group taxation system.
(14) Net income and cash dividends per share
Net income per share is computed based on the weighted average number of shares of share capital outstanding during each period. Diluted
net income per share is computed with the assumption that all convertible bonds were converted into share capital at the beginning ofeach period. Cash dividends per share represent interim dividends declared by the Board of Directors during each year and year-end
dividends approved by the shareholders at the annual meeting held subsequent to the end of the fiscal year.

(15) Derivatives and hedge accounting
The Companies generally state derivative financial instruments at fair value and recognize changes in the fair value as gains or losses
unless the derivative financial instruments are used for hedging purposes. If derivative financial instruments are used as hedges and meetcertain hedging criteria, the Companies generally defer recognition of gain or loss resulting from a change in the fair value of the derivative
financial instrument until the related loss or gain on the hedged item is recognized.
The Companies use currency forward contracts to hedge accounts receivable and payable denominated in foreign currencies (mainly U.S.
dollars) against the risk of fluctuation in exchange rates that comes from foreign currency transactions.
Certain foreign exchange contracts are subject to appropriation if they satisfy the requirements of appropriation treatment. Interest rate
swaps that qualify for hedge accounting and meet specific matching criteria are not re-measured at market value.
(16) Amortization of goodwill
Goodwill is amortized evenly over the reasonably estimated effective duration recognized. However, when de-minimis, it is charged in full
during the fiscal year it arose.
(17) Reclassifications
Certain prior year amounts have been reclassified to conform to the 2023 presentation.

3.Significant accounting estimates(Net sales where the performance obligations in construction contracts are satisfied over a certain period of time and provision for loss on
construction contracts)(1) Carrying amounts in the current year’s financial statements
Net sales where the performance obligations in construction contracts are satisfied over a certain period amounted to \ 30,977 million($ 231,982 thousand) for the year ended March 31, 2023 and amounted to \ 44,277 million for the year ended March 31, 2022.
Provision for loss on construction contracts amounted to \ 626 million ($ 4,685 thousand) for the year ended March 31, 2023 and amounted
to \ 1,517 million for the year ended March 31, 2022.
(2) Information on the nature of significant accounting estimates for identified items
The performance obligations in such construction contracts are satisfied over time, therefore revenue in The Takuma Group is recognizedbased on the progress towards complete satisfaction of the performance obligation. Estimates of the progress is measured on the basis of
the construction costs incurred by the end of each reporting period relative to the total expected construction costs. In addition, in orderto prepare for the loss of order construction, the estimated amount of construction costs generated significantly exceeds the order amount.
Excess amounts that are expected to occur after the consolidated fiscal year are recorded as provision for loss on construction contracts.
In calculating the estimated cost of construction, information and conditions available as of the end of the current consolidated fiscal year
for each individual project (materials and equipment, construction prices, labor costs, specifications, construction methods, etc.) are thebasis for calculation.
However, after-sales service for various construction and delivery plants provided by the Group, the specifications, and some periods fromorder to delivery and service delivery are long-term. Therefore, changes in the basis of calculations due to construction issues and changes
in economic conditions will have a significant impact on consolidated financial statements for the next consolidated fiscal year.

(Deferred tax assets)(1) Carrying amounts in the current year’s financial statements
Deferred tax assets was amounted to \ 4,160 million ($ 31,152 thousand) for the year ended March 31, 2023 and amounted to \ 4,748
million for the year ended March 31, 2022.
(2) Information on the nature of significant accounting estimates for identified items
The Takuma Group reasonably estimates future taxable income based on business plans for deferred tax assets and the amount that is
expected to be recoverable.
Each group company determines the classification based on accounting standards, and the expected amount recoverable is calculated
based on future taxation within a reasonable estimate period according to the classification and the scheduling of income and one-timedifference in future subtraction.
However, due to changes in the business environment because of a decrease in demand, etc., the estimated period based on theclassification and the estimated amount of future taxable income and deferred tax assets will be increased or reduced, which will have amaterial impact on the consolidated financial statements for the next consolidated fiscal year.

4. Cash and cash equivalents
Amounts of cash and cash equivalents as of March 31, 2023 and 2022 were reconciled with cash and deposits as follows:

Cash and deposits
Time deposits with maturities exceeding three months
from the date of acquisition
Total cash and cash equivalents¥

Millions of yen
2023
2022
65,243¥ 42,979¥(1,331)
63,912¥(1,735)41,244

Thousands of U.S. dollars
2023$ 488,600(9,968)$ 478,632

5. Inventories
Inventories were summarized as follows:

Merchandise and finished goods
Work-in-process
Materials and supplies
Total inventories

Millions of yen
2023
2022
840
¥
834
3,247
2,140
1,925
1,631
¥
6,012
¥
4,605
¥

Thousands of U.S. dollars
2023
$
6,288
24,32014,414$ 45,022

6．Ｆｉｎａｎｃｉａｌ instruments(1) Status of financial instruments(a) Financial instruments policy
Under the Group policy, investments in financial instruments are limited primarily to short-term deposits and bank loans for raising funds. Derivative transactions are used to hedge risks offluctuations in foreign exchange and interest rates and the Companie's do not conduct speculative transactions.

(b) Financial instruments, risks and risk management structure
The Companies are working to reduce customer credit risk associated with notes and accounts receivable and contract assets through customer based due dates and other balance controls
in accordance with the Companies' regulations. Investment securities consist mainly of stocks and are periodically checked for the fair value of the listed shares.
Notes and accounts payables, or operating payables, are due within one year.
Short-term loans payable is primarily for operating funds while long-term borrowings is for capital investment.

To cope with operating receivables and loans exposed to liquidity risk, each Group company prepares monthly cash-flow plans and enters into loan commitment agreements with several
financial institutions for raising working capital flexibly and stably.

(c) Supplementary remarks on fair values of financial instruments
The fair values of financial instruments do not reflect the market risks concerning the derivative trading.

(2) Fair value of financial instruments
Amounts recognized on the consolidated balance sheets, fair values and any differences between them as of March 31, 2023 and 2022, except items for which no fair value was obtainable,
were as follows:
The following summary excludes cash, and deposits, notes and accounts receivable – trade, notes and accounts payable, income taxes payable and short-term loans payable are notincluded because the fair values of these instruments approximate their carrying amounts as they are expected to be settled shortly.

（Investment securities）
Amounts recognized on the consolidated balance sheets
Fair value
Difference

Millions of yen
2023
2022
¥ 16,110¥ 14,341
16,11014,341¥¥-Thousands of U.S. dollars
2023$ 120,647
120,647$-

Millions of yen
2023
2022
2,170
¥
2,672

Thousands of U.S. dollars
2023$ 16,254

Millions of yen
2022
70
¥
159
70
159
¥
-

Thousands of U.S. dollars
2023
$
527
527
$
-

Equity securities without market price are not included in (Investment securities).
(Non-listed equity securities)
Amounts recognized on the consolidated balance sheets
Equity securities¥(Derivative transactions)
Derivative transactions recorded in other assets and liabilities are presented as a lump sum.
Net claims and debts that arise from derivative transactions are presented on a net basis.
2023

Amounts recognized on the consolidated balance sheets
Fair value
Difference¥¥(3) Redemption schedule of monetary assets with contractual maturities and repayment schedule of short-term loans payable and long-term borrowings
As of March 31, 2023
Less than 1 year
¥ 65,243
3,175
33,305Investment securities
Total¥ 101,723

¥

-

¥

-

¥

-

¥

-

¥

800
800

Short-term loans payable
Total

¥
¥

¥
¥

-

¥
¥

-

¥
¥

-

¥
¥

-

¥
¥

-

220
220

1 to 2 years¥-

2 to 3 years¥-

Millions of yen
3 to 4 years¥-

Cash and deposits
Notes receivable
Accounts receivable

4 to 5 years¥-

More than 5 years¥-

As of March 31, 2022
Cash and deposits
Notes receivable
Accounts receivable
Investment securities
Total
Short-term loans payable
Long-term borrowings
Total

Less than 1 year
¥ 42,979
3,066
30,851¥¥¥

76,896220
80
300

1 to 2 years¥-

2 to 3 years
¥
-

¥
¥

¥

-

¥

Millions of yen
3 to 4 years
¥
¥

¥

-

¥

4 to 5 years
¥
-

¥

¥

-

¥

¥
¥

-

More than 5 years
¥
800
800

¥
¥

-

¥

As of March 31, 2023
Less than 1 year
$ 488,600
23,779249,419

Investment securities
Total$ 761,798

$

-

$

-

$

Short-term loans payable
Total

$
$

$
$

-

$
$

-

$
$

1,648
1,648

1 to 2 years$-

Thousands of U.S. dollars
2 to 3 years
3 to 4 years
4 to 5 years$$$-

Cash and deposits
Notes receivable
Accounts receivable--

More than 5 years
$
-

$

-

$

5,991
5,991

$
$

-

$
$

-

(4) Fair value information of financial instruments by level of inputs
Based on the observability and the significance of the inputs used to determine fair values, fair value information of financial instruments is presented by categorizing measurements into thefollowing three levels:
Level 1 fair value: the fair value measured by quoted prices of identical assets or liabilities in active markets.
Level 2 fair value: the fair value measured using observable inputs other than Level 1.
Level 3 fair value: fair values measured using unobservable inputs.
When multiple inputs of different categories are used in measuring fair value, the Company and its subsidiaries classified fair values into a category to which the lowest priority is assigned.

(a) financial instruments measured at fair values in the consolidated balance sheet
As of March 31, 2023
Level 1

Investment securities
Other investments in securities
Equity securities
Corporate bonds
Derivative transactions
Currency related
Total assets¥¥

15,322
15,322Millions of yen
Level 3

Level 2

¥

¥

788
70
858

¥

¥

-

Total

¥

¥

15,322788
70
16,180

As of March 31, 2022
Level 1

Investment securities
Other investments in securities
Equity securities
Corporate bonds
Derivative transactions
Currency related
Total assets¥¥

13,536
13,536

Millions of yen
Level 3

Level 2

¥

¥

804
160
964

¥

¥

-

Total

¥

¥

13,536804
160
14,500

As of March 31, 2023
Level 1

Investment securities
Other investments in securities
Equity securities
Corporate bonds
Derivative transactions
Currency related
Total assets$ 114,748$ 114,748

Level 2$$Thousands of U.S. dollars
Level 3

5,899
527
6,426

$

$

Total

-

$ 114,748
5,899

-

527
$ 121,174

(b) Financial instruments other than those measured at fair values in the consolidated balance sheet
Not appliciable(Note) Valuation techniques and inputs used in measuring fair values
Investments in securities classified as current or non-current
Listed equity securities and corporate bonds are measured using quoted prices. The fair value of listed equity securities are classified as level 1, because they are exchanged in active
markets. The fair value of corporate bonds are classified as level 2, because their quoted prices are not considered to be a quoted price in active markets due to their low frequency oftransactions.
Derivative transactions
Derivatives are classified in Level 2 since they are measured at fair value using observable market inputs obtained from financial institutions.

7. Securities(1) Acquisition costs and book values of available-for-sale securities with available fair values as of March 31, 2023 and 2022 were as follows:
As of March 31, 2023
Securities with book values exceeding acquisition costs：
Equity securities
Subtotal
Securities with book values not exceeding acquisition costs：
Equity securities
Debt securities
Subtotal
Total

Acquisition cost

As of March 31, 2022
Securities with book values exceeding acquisition costs：
Equity securities
Subtotal
Securities with book values not exceeding acquisition costs：
Equity securities
Debt securities
Subtotal
Total

Acquisition cost

As of March 31, 2023
Securities with book values exceeding acquisition costs：
Equity securities
Subtotal
Securities with book values not exceeding acquisition costs：
Equity securities
Debt securities
Subtotal
Total

Acquisition cost

¥

¥

¥

¥

$

$

7,216
7,216
531
829
1,360
8,576

6,517
6,517
1,301
828
2,129
8,646

Millions of yen
Book value

Difference

¥

¥

¥

14,866
14,866
456
788
1,244
16,110

¥

7,650
7,650
(75)
(41)
(116)
7,534

Millions of yen
Book value

Difference

¥

¥

¥

12,542
12,542
995
804
1,799
14,341¥Thousands of U.S. dollars
Book value

54,04254,042$ 111,334
111,334

3,978
6,202
10,18064,222

3,414
5,899
9,313
$ 120,647

6,025
6,025
(306)
(24)
(330)
5,695

Difference$$

57,29257,292
(564)
(303)
(867)
56,425(2) Available-for-sale securities sold for the years ended March 31, 2023 and 2022 were as follows:

Total sales amount
Gains

Millions of yen
2023
2022
¥
390
¥
377
195
197

Thousands of U.S. dollars
2023
¥
2,923
1,461

8. Pledged assets
The following assets were pledged to secure short-term loans payable, long-term borrowings, and ｃontingent liabilities under guarantees for bank loans of affiliated companies andfulfillment of contracts as of March 31, 2023 and 2022:

2023

Time deposits as construction contract guarantees
Total

¥
¥

Millions of yen
2022
83
¥
64
83
¥
64

Thousands of U.S. dollars
2023
$
623
$
623

9. Short-term loans payable and long-term borrowings
Short-term loans payable as of March 31, 2023 and 2022 were as follows:

SecuredUnsecured

Millions of yen
2022
¥
220
220
220
¥
220

Thousands of U.S. dollars
2023
$
1,648
$
1,648

Millions of yen
2022
¥
80
¥
80

Thousands of U.S. dollars
2023
$
$
-

2023
¥
¥

Current portion of long-term borrowings as of March 31, 2023 and 2022 was as follows:

2023

SecuredUnsecured¥¥The annual average interest rate applicable to bank loans at March 31, 2023 and 2022 was as follows:
2023
1.1%
1.0%

Short-term loans payable
Current portion of long-term borrowings

2022
0.8%
2.2%

10. Employees' retirement benefits(1) Outline of adopted retirement benefit scheme
The Company and a part of consolidated subsidiaries provide three types of post-employment benefit plans, unfunded lump-sum payment plans, funded non-contributory pension plans anddefined contribution plan. A part of consolidated subsidiaries which provide funded non-contributory pension plans and unfunded lump-sum payment plans, calculate retirement benefit
liability and retirement benefit costs applying the simplified method.

(2) Defined benefit plans
Movement in retirement benefit obligations (except plans applying the simplified method) for the years ended March 31, 2023 and 2022 was as follows:

Balance at April 1, 2023 and 2022
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Balance at March 31, 2023 and 2022

Millions of yen
2023
2022
10,026
¥
9,738
657
633
55
52
(8)
(67)
(533)
(330)
¥ 10,197¥ 10,026¥

Thousands of U.S. dollars
2023$ 75,087
4,920
409
(64)
(3,990)$ 76,362

Movement in retirement benefit liability of plans applying the simplified method for the years ended March 31, 2023 and 2022 was as follows:

Balance at April 1, 2023 and 2022
Retirement benefit costs
Contributions paid by the employer
Benefits paid
Other
Balance at March 31, 2023 and 2022

Millions of yen
2023
2022
726
¥
665
114
120
(29)
(30)
(46)
(39)
(19)
10
¥
746
¥
726
¥

Thousands of U.S. dollars
2023
$
5,440
855
(214)
(355)
(140)
$
5,586

Reconciliation from retirement benefit obligations and plan assets to retirement benefit liability as of March 31, 2023 and 2022 was as follows:

Funded retirement benefit obligations
Plan assets¥

Unfunded retirement benefit obligations
Total retirement benefit liability (asset) at March 31, 2023 and 2022
Retirement benefit liability
Net defined benefit asset
Total retirement benefit liability (asset) at March 31, 2023 and 2022¥

Millions of yen
2023
2022
629
¥
619
(435)
(435)
194
184
10,74910,56910,943
10,753
10,980(37)
10,943¥

10,792(39)
10,753Thousands of U.S. dollars
2023
$
4,708
(3,258)1,450
80,49881,948$82,232(284)
81,948(Note)Including plans applying the simplified method
Retirement benefit costs for the years ended March 31, 2023 and 2022 were as follows:

Service cost
Interest cost
Amortization of actuarial differences
Retirement benefit costs based on the simplified method
Total retirement benefit costs for the fiscal years ended March 31, 2023 and 2022

Millions of yen
2023
2022
657
¥
633
55
52
109
129
114
120
¥
935
¥
934

Thousands of U.S. dollars
2023
$
4,920
409
818
855
$
7,002

¥
¥

Millions of yen
2023
2022
118
¥
195
118
¥
195

Thousands of U.S. dollars
2023
$
882
$
882

¥
¥

Millions of yen
2023
2022
(199)
¥
(317)
(199)
¥
(317)

Thousands of U.S. dollars
2023$(1,491)$(1,491)¥Remeasurements of defined benefit plans for the years ended March 31, 2023 and 2022 were as follows:

Actuarial gains and losses

Total ｒemeasurements of defined benefit plans for the fiscal years ended March 31, 2023 and 2022
Accumulated ｒemeasurements of defined benefit plans as of March 31, 2023 and 2022 were as follows:

Actuarial gains and losses yet to be recognized
Total balance at March 31, 2023 and 2022
The principal actuarial assumptions at March 31, 2023 and 2022 were as follows:
Discount rate
Expected rate of salary increase

2023
2022
principally 0.64% principally 0.64%
principally 5.3%
principally 5.4%

(3) Defined contribution plan
The amount of contribution required for the defined contribution plans of the Companies for the years ended March 31, 2023 and 2022 was \152 million ($1,140 thousand) and \154million, respectively.

11. Contingent liabilities
The Companies were contingently liable under guarantees for bank loans of affiliated companies and other companies as of March 31, 2023 and 2022 as follows:
2023

Unsecured¥

Millions of yen
2022
89
¥
119

Thousands of U.S. dollars
2023
$
667

12. Net assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as share capital. However, a company may, by a resolution of the Board of
Directors, designate an amount not exceeding one half of the price of the new shares as additional paid-in capital, which is included in capital surplus.
Under the Japanese Corporate Law (the “Law”), in cases in which a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of
25% of share capital over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is
included in retained earnings in the accompanying consolidated balance sheets.
Under the Law, legal earnings reserve and additional paid-in capital can be used to eliminate or reduce a deficit or be capitalized by a resolution of the shareholders' meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital and all legal earnings reserve may be transferred toother capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of the Company
in accordance with Japanese laws and regulations.
The appropriation of retained earnings with respect to a given financial year is made by resolution of the shareholders at a general meeting held
subsequent to the close of such financial year. The accounts for that year do not, therefore, reflect such appropriations.

13. Provision for losses on sales contracts
Provision for losses on sales contracts included in cost of sales for the years ended March 31, 2023 and 2022 was as follows:
2023¥

Millions of yen
2022
30
¥
28

Thousands of U.S. dollars
2023
$
225

14. Research and development expenses
Research and development expenses are charged to income as incurred. Such expenses included in cost of sales and selling, general and administrative expenses for the years ended March
31, 2023 and 2022 were as follows:¥

Millions of yen
2023
2022
1,151
¥
1,006

Thousands of U.S. dollars
2023
$
8,619

Millions of yen
2022

Thousands of U.S. dollars
2023

15. Income taxes
Components of the Companies' deferred tax assets and liabilities as of March 31, 2023 and 2022 were as follows:
2023

Deferred tax assets:
Retirement benefit liability
Accrued cost of sales
Provision for bonuses
Unrealized income on Non-current assets
Loss on valuation of inventories
Accrued enterprise tax
Provision for loss on construction contracts
Other
Deferred tax assets – subtotal
Valuation reserves
Total deferred tax assets
Deferred tax liabilities:
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets

¥

3,384

¥

3,323

$

25,343

2,420

1,871

18,125

1,169

1,034

8,750

672

645

5,030

268

251

2,007

210

88

1,570

200

472

1,501

1,432

2,253

10,727

9,755

9,937

73,053¥(2,991)
6,764¥(3,035)
6,902$(22,399)
50,654¥(2,292)¥(1,724)$(17,165)

$

¥

(328)

(443)

(2,456)(2,620)4,144(2,167)
4,735(19,621)31,033¥

There was no significant difference between the normal effective statutory tax rates and the effective tax rates reflected in the accompanying consolidated statements of income for the years
ended March 31, 2022 and March 31, 2023.
Accounting for corporation tax and local corporation tax and tax effect accounting
The Company and some of its domestic consolidated subsidiaries have adopted the group tax sharing system from the fiscal year ended March 31, 2023. In addition, corporation tax andlocal corporation tax, as well as their tax effects, are accounted for and disclosed under Practical Solution on the Accounting and Disclosure under the Group Tax Sharing System (PITF
No.42, August 12, 2021).

16. Revenue
Disaggregated revenue by business unit is as follows:
As of March 31, 2023

Millions of yen
Reportable segments
Domestic Environment and Energy Business
Municipal Solid
Waste Plants

Net sales

70,027

Energy Plants
33,551

Other

Subtotal

12,116

As of March 31, 2022

Overseas
Environment
and Energy
Business

Package Boiler
Business

1,327

17,286

Overseas
Environment
and Energy
Business

Package Boiler
Business

931

16,468Overseas
Environment
and Energy
Business

Package Boiler
Business

9,940

129,452

115,694

Equipment
andSystemBusiness

Total

8,345

142,652

Millions of yen
Reportable segments
Domestic Environment and Energy Business
Municipal Solid
Waste Plants

Net sales

70,669Energy Plants

Other29,110Subtotal
8,348

As of March 31, 2023

108,127

Equipment
andSystemBusiness

Total

8,567

134,093

Thousands of U.S. dollars
Reportable segments
Domestic Environment and Energy Business
Municipal Solid
Waste Plants

Net sales

524,429

Energy Plants
251,263

Other
90,734

Subtotal
866,426

Equipment
andSystemBusiness

Total

62,493

1,068,311

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 theamount and timing of revenue expected to be recognized from the contract with the customer existing at the end of the current consolidated fiscal year after the next consolidated fiscal
year.

(1) Balance of contract assets and contract liabilities, etc.
Receivables arising from contracts with customers（beginning balance）
Receivables arising from contracts with customers（balance at the end of the period）
Contract assets（beginning balance）
Contract assets（balance at the end of the period）
Contract liabilities（beginning balance）
Contract liabilities（balance at the end of the period）¥

Millions of yen
2023
2022
33,916¥ 42,313
36,48033,91648,18541,91024,371
48,185
8,669
11,059Thousands of U.S. dollars
2023$ 253,999
273,198
360,857
182,515

9,349
8,669

64,92382,822Contract assets consist of the rights to receive consideration in exchange for the fulfilled portion of contractual obligations, which is measured based on the progress of such obligations forconstruction contracts at the end of the reporting period, and when they become unconditional, the rights to the consideration are transferred to receivables arising from contracts withcustomers.
Contract liabilities are advances received from customers for construction contracts, used for expenditures as revenue is recognized.
In revenue recognized at the current consolidated fiscal year, which was included in contract liabilities at the beginning of the years ended March 31,2023 and 2022 was ¥6,551 million($49,059 thousand) and ¥5,684 million, respectively.
Incidentally, the amount of revenue recognized from performance obligations satisfied in the previous periods is not material for the current fiscal year.

(2) Transaction price allocated to remaining performance obligation
The aggregate amount of the transaction price allocated to the performance obligations that were unsatisfied (or partially unsatisfied) were ¥447,646 million ($3,352,402 thousand) and ¥433,351 million for the years ended March 31,2023 and 2022, respectively. These performance obligations are related to construction, operational control and O&M contracts in theDomestic Environment and Energy Business and expected to be recognized as revenue within approximately 5 years in construction contracts and 20 years in operational control and O&M
contracts.
There is no significant variable consideration which is not included in transaction price in the amount of consideration from contracts with customers.

17. Comprehensive income
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous periods and the tax effects for each component ofother comprehensive income were as follows:

2023

Valuation difference on available-for-sale securities
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Deferred gains or losses on hedges
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax¥

Millions of yen
2022

1,856
(17)
1,839
(568)
1,271

¥

(89)
(89)
27
(62)

¥

16
16
16

¥

¥

¥

9
109
118
(36)
82

¥

1,307

¥

¥

¥

Thousands of U.S. dollars
2023
(547)
(188)
(735)
230
(505)

$

107
107
(33)
74

$

68
68
68

$

$

¥

67
129
196
(60)
136

$

64
818
882
(270)
612

¥

(227)

$

9,788

¥

¥

$

$

13,903(130)
13,773(4,254)
9,519

(665)
(665)
203
(462)

Foreign currency translation adjustment

Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax

¥

¥

¥

$

119
119
119

Remeasurements of defined benefit plans

Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Total other comprehensive income¥18. Segment information(Supplemental information - Accounting Standard for Disclosures about Segments of an Enterprise and Related Information)(1) General information about reportable segments
In the Group, businesses for which separate financial information is available are grouped into the following four reportable segments in accordance with the similarity
of products and services of the respective business. The results of each reportable segment are reviewed periodically by the Board of Directors to assess thesegment's business performance.
Domestic Environment and Energy Business
General waste treatment plants, industrial waste treatment plants, waste recycling plants, wastewater treatment plants, sludge combustion plants and biomass power
plantsOverseas Environment and Energy Business
Waste combusting power plants and biomass power plants
Package Boiler BusinessCompact through-flow boilers and vacuum water heating systems
Equipment and System Business
Construction equipment, equipment for semi-conductor industry and cleaning systems(2) Basis of measurement about reportable segment profit or loss and other material items
Accounting methods used for reportable segments are the same those explained in Note 2, “Summary of significant accounting policies.”
Profits of reportable units are operating profit. Internal revenue and transfers between reportable segments are recorded using prevailing market prices.
(3) Information about reportable segment profit or loss and other material items
Reportable segment information for the years ended March 31, 2023 and 2022 was as follows:Year ended March 31, 2023
Sales:
Outside customers
Intersegment
Total
Reportable segment income (loss)
Others:Depreciation

Year ended March 31, 2022
Sales:
Outside customers
Intersegment
Total
Reportable segment income (loss)
Others:Depreciation

Year ended March 31, 2023
Sales:
Outside customers
Intersegment
Total
Reportable segment income (loss)
Others:Depreciation

Millions of yen
Domestic
Overseas
Equipment
Environment and Environment andPackageandEnergy Business Energy Business Boiler Business System Business¥ 115,694
292
115,986¥ 14,875

¥

¥

948

¥

¥

1,327
25
1,352
(173)

¥

¥

17,28627
17,313
915

¥

8,345
15
8,360
826

¥

3

¥

150

¥

32

Total

¥

770

¥

¥

¥

931
74
1,005
(219)

¥

¥

16,46831
16,499
674

¥

8,567
24
8,591
656

¥

3

¥

162

¥

22

$

9,940
182
10,122(1,295)

$

$

22

7,099

$

$ 129,452
201
129,653
$
6,856

$
$

62,493
117
62,610
6,187

$

$

240

1,122

¥

¥ 142,652
142,652¥ 13,814

¥

(359)
(359)
(2,629)

¥

¥

3

1,133

Total

¥

¥ 134,093
134,093
¥
9,929

¥

¥

¥

5

¥

962

Adjustment

Consolidated$$1,068,311
1,068,311$ 103,449$1,068,311
2,686
1,070,997$ 123,149$(2,686)(2,686)(19,700)

$

$

25

8,483

1,136

Consolidated

(659)
(659)
(2,088)957¥

Adjustment¥ 134,093
659
134,752¥ 12,017

Thousands of U.S. dollars
Domestic
Overseas
Equipment
Environment and Environment andPackageandEnergy Business Energy Business Boiler Business System BusinessTotal$ 866,426
2,186
868,612$ 111,401

Consolidated¥ 142,652
359
143,011¥ 16,443

Millions of yen
Domestic
Overseas
Equipment
Environment and Environment andPackageandEnergy Business Energy Business Boiler Business System Business¥ 108,127
530
108,657¥ 10,906

Adjustment

$

8,508

Adjustments in reportable segment income (loss) include eliminations of transactions between segments and corporate expenses not allocated to reportable segment
expenses, including selling, general and administrative expenses not attributable to reportable segments.
Total reportable segment income is adjusted with operating profit reported on the Consolidated Statements of Operations.
Disclosure of information related to segment assets is omitted since assets are not allocated to business segments.

(Related information)
Reportable segment information for the years ended March 31, 2023 and 2022 was as follows:(1) Information about products and services
Disclosure of this information is omitted since similar information is disclosed in Note 18, “Segment information.”(２) Information about geographic areas
Revenues
Since over 90% of net sales reported on the Consolidated Statements of Operations were sales to outside customers within Japan, disclosure of this information isomitted.
Tangible fixed assets
Since 90% of tangible noncurrent assets reported on the consolidated balance sheet (in terms of values) were located within Japan, disclosure of this information isomitted.
(３) Information about major customers
Since no outside customer accounted for 10% or more of net sales reported on the income statement, disclosure of this information is omitted.
（Information related to noncurrent asset impairment loss by reportable segment）
Not applicable（Information related to amortization and unamortized balance of goodwill）
The note is omitted because it is not important.
（Information related to gain on negative goodwill by reportable segment）
Not applicable