Financial Report 2024
period covered: FY2022-2023

Financial Report 2024
Any forward-looking statements in the following discussion and analysis are based on the judgment ofmanagement as of March 2024.

Management Policies, Management Environment and Issues to be Addressed, etc.
(1) Expectations for achieving the Medium-Term
Management Plan and factors involved

strengthening our core business.
The Group’s strength is Integrated Growth
Solutions that achieve topline growth for clients byintegrating the Group’s diverse range of uniquecapabilities at the convergence of marketing,technology and consulting. To accelerate thisstrength, we will focus on evolving existing assets
and driving their integration with other capabilities.
To achieve this, we have introduced a globallyconsistent “One dentsu Operating Model” this year.
Through this, we will establish a truly client-centric
solution delivery structure, accelerate collaboration
among regions and practices, and simplify
operations and organizations in order to return to
growth and improve profitability.

Factors including the adverse results for FY2023
have meant that it will be difficult to achieve thecommitments regarding organic growth rate andoperating margin made under the current MediumTerm Management Plan, which concludes in FY2024,
although the Company is on track to achieve some of
the commitments related to capital allocation and
ESG. Specifically, with the organic growth rate for
FY2023 is negative 4.9%, and the FY2024 guidanceis c.1%, the targeted CAGR of 4-5% vs. FY2021
through FY2024 will be difficult to achieve. Likewise,
the Company targeted an operating margin of 17%
to 18% through 2023, reaching 18% in 2024. Whilst
the operating margin target was delivered in FY2022,
a weaker than expected top line resulted in marginpressure. The operating margin was 14.5% for
FY2023 and guided to c.15% for FY2024.
Analysis for the Group’s results falling short ofits targets under the Medium-Term Management
Plan has revealed several internal factors within theGroup itself, in addition to changes in the Group’s
external environment such as the decline in spendingby finance and technology clients. Specifically, themain factors include a growth strategy leaningheavily on acquisition instead of internal investment,
delays in providing integrated solutions due to thesiloed nature of the organization and delays inreforming the cost structure as business operations
became more complicated and multilayered amid
accelerating acquisitions. The Group has alreadycommenced initiatives to address these factors
under the “One Management Team,” which wasintroduced in 2023.

(3) A ction Plan in FY2024
In order to achieve more solid organic growth, theGroup has organized the actions to take in FY2024
into three tasks: “internal investment to realize
Integrated Growth Solutions,” “business portfolio
review and enhancing financial discipline,” and“restructuring of governance and internal controls.”1) Internal investment to realize Integrated
Growth SolutionsFirst, to achieve sound business growth through“Integrated Growth Solutions,” the core of theGroup’s business strategy, we will strengtheninternal investments. Specific areas of investment
include the data and technology area to provide
highly accountable solutions, developing andacquiring talents to propose and execute
Integrated Growth Solutions, and strengthening
business operations and the enterprise platform,
among others.

Focus management resources to return to(2) organic growthBusiness portfolio review and enhancing2) 
financial discipline
As it pursues its business strategy, the Group willrefine its focus on specific business domains andmarkets based on the consistent strategy of One

In light of this situation, we believe that what weneed to do, especially in 2024, is to concentrate
our management resources on organic growth by1

Dentsu Group Integrated Report 2024

an incident. Meanwhile, the financial results in the
DACH cluster were adversely impacted by acomplex business transformation and systems
integration. This resulted in the Group recognizing
a one-off financial impact as previously reported.
The impact was a result of a number of paralleltransformation workstreams happening at thesame time. This included changes to our People
system, project management systems, and financesystems. Adding to this complexity, DACH is amulti-market, multi-currency cluster. This resulted
in the misalignment of certain business processes
and systems. A comprehensive internal investigation
has taken place, supplemented by a review
conducted by external legal advisers and an
accounting firm appointed by the Group’s global
general counsel and internal audit. Group internal
audit has also assessed the case. The investigation
presented root causes including inadequate
project management and remediations. The
Group believes that the risk of recurrence within
DACH or other markets is limited and has been
mitigated based on the investigation. The Group
has already begun implementation of therecommendations within the report, includingchanges to the business processes and system
improvements. In addition to addressing these
specific incidents, the Group will endeavor to
restructure governance and internal controls. It isalready pushing ahead with initiatives to strengthen
this framework, such as appointing people
responsible for global internal controls and risk. At
the same time, it aims to create an organizational
culture that prioritizes integrity through theGroup-wide adoption of the Dentsu Group Codeof Conduct, a joint initiative by the management
team and the Group’s employees. Moreover, thecontinued implementation of the One dentsu
Operating Model will simplify the organization to
speed up decision-making, clarify responsibilities,
and delegate authority, leading to effective
business operations and corporate activities basedon robust business processes and governance toreduce recurrence risk.
The Group is also continuing to consider
its optimal approach to the Company’s listeddentsu. The Group provides services through its
proprietary network across over 140 countries
worldwide. In this context, it will clarify the markets
and services that it should focus on, in light of its
strategy, and concentrate on the investment of
resources in these areas. Until now, the Group has
actively pursued acquisitions in the Customer
Transformation & Technology domain, aiming toearn 50% of its net revenue from this domain. For
the time being, it will focus on PMI and synergy
generation using the assets already acquired, andenhance discipline in overall investment activities,
including strengthening the monitoring system for
performance trends and the contributions made to
strategies. We will also work to transform ourbusiness portfolio, restructuring and reviewing
unprofitable businesses and markets. In order toensure financial discipline in carrying out thesereforms and achieving sustainable businessgrowth, we have decided to establish a FinanceCommittee, consisting of outside directors, as anadvisory body to the Board of Directors. The
committee will assist in the promotion of businessand the enhancement of financial governancethrough the formulation of disciplined financial
strategies and policies, review of capital allocation,
establishment of financial metrics from theperspective of shareholders, and monitoring of theimplementation of these initiatives.
3) R estructuring of governance andinternal controls
On February 28, 2023, the Company had a criminal
complaint filed against it by the Japan Fair Trade
Commission and was indicted by the Tokyo District
Public Prosecutors Office for an alleged violationof the Antimonopoly Act in connection to thebidding for the test events of the Tokyo 2020
Olympic and Paralympic Games. The Company’s
dentsu Japan Reform Committee subsequently
formulated the Mindset and Behavior Reform,
based on the analysis of the incident’s causes andrecommendations submitted by the Investigation
and Review Committee, composed of external
experts. The Company’s officers and employees
are all working to prevent the recurrence of such2

Dentsu Group Integrated Report 2024

Financial Report 2024

subsidiaries, based on each company’s strategic
positioning. Appropriate reports will be madewhen this policy is decided.
(4) To improve shareholder value
Through these strategies and actions, we will ensure
long-term shareholder value. First, we will improve
profits and cash flow through organic growth andcost structure reforms. At the same time, we will
strengthen our investment discipline and shift theinvestment balance from acquisitions to internal
investments. In addition to this, we will optimize ourbalance sheet and improve capital efficiency throughthe review of our business portfolio and investment.
Although market conditions remain uncertain, we
will continue to tirelessly transform our business toadapt to the new environment. Specific plans forbusiness transformation, etc. will be announced later
this year in the form of a new Medium-Term
Management Plan.

3

Dentsu Group Integrated Report 2024

Comprehensive Business Overview

revaluation of M&A related put-option liabilities), tax
effects and potion attributable to non-controllinginterests of these items and other one-off items
are removed.

In 2023, the outlook for the global economy
remained uncertain due to factors such as theprolonged invasion of Ukraine by Russia, worldwide
inflation and monetary tightening by central banks inresponse, and financial unrest due to the bankruptcy
of some financial institutions in the United States.
In this environment, for the business results
during the fiscal year 2023 (from January 1 to
December 31, 2023), the Group recorded a 2.3%
increase year on year for net revenue. The net
revenue organic growth rate was negative 4.9%.
Underlying operating profit decreased by 20.0%
year on year due to an increase in selling, generaland administrative expenses. This resulted fromfactors such as higher expenses associated withrising prices and the post-pandemic recovery, as
well as an increase in personnel expenses due mainly
to an increase in the number of personnel. Operating
margin fell by 390 bps and underlying net profit
attributable to owners of the parent fell by 31.3%
year on year. Operating profit decreased by 61.5%
year on year, mainly due to posting an impairment
loss, and the Group recorded a net loss attributableto owners of the parent of ¥10,714 million (net profitof ¥59,847 million for the previous fiscal year).
Underlying operating profit is calculated
by eliminating M&A related items and one-off
items from operating profit, and is used bymanagement for the purpose of measuring
constant business performance.
M&A related items: amortization of intangible
assets incurred in acquisitions, acquisition
costs, share-based compensation expenses
issued following the acquisition of 100%
ownership of a subsidiary
One-off items: items such as restructuring costs,
impairment loss and gain/loss on sale ofnon-current assets
Underlying net profit attributable to owners of
the parent is an indicator to measure recurring net
profit attributable to owners of the parent which is
calculated as net profit (attributable to owners of theparent) where adjustment items related to operating
profit, change in fair value of contingent consideration(gain/loss on revaluation of earnout liabilities),
revaluation of put option liabilities (gain/loss on
4

Dentsu Group Integrated Report 2024

Financial Report 2024
Consolidated Financial Results

Consolidated financial results for the fiscal year
ended December 31, 2023

million in APAC, in addition to the decline in businessprofit. The Group recorded a net loss attributable toowners of the parent of ¥10,714 million.
As in the previous fiscal year, we continued
to focus on M&A activities in the Customer
Transformation & Technology (CT&T) domain,
acquiring companies such as the CRM consulting
firm Omega Customer Relationship Management
Consulting, S.L. in Spain, the B2B experience andcommerce agency Shift7 Digital, LLC. in the U.S., theglobal omnichannel digital marketing production
powerhouse Tag Worldwide Holdings Ltd. in the
U.K., and RCKT GmbH, a leading German digital-firstbrand, communications and creative agency.
In contrast to the double-digit growth of the
CT&T domain in Japan and the contribution of the
newly consolidated subsidiaries, the Group was
impacted by the delay and downsizing of projects
internationally in the CT&T domain. 32% of total net
revenue was sourced in this domain, a similar level tothe previous fiscal year.

(Millions of yen, with negative amounts shown in parentheses)
FY2023(Jan-Dec)

Item

FY2022 Year-on-year(Jan-Dec)changeRevenue

1,304,552

1,246,401

Net revenue

1,144,819

1,119,519

2.3%

Operating profit

45,312

117,617(61.5)%

Profit (loss) attributable toowners of the parent(10,714)59,847–(Note)

4.7%

Profit distribution from the Content business, which was previously
presented under “Other income,” has been included in “Revenue” forthe fiscal year ended December 31, 2023. Moreover, amortization of
long-term prepaid expenses, etc., which had been presented under“Other expenses” as expenses related to the said profit distribution,
has been included in “Revenue” as a deduction item of revenue. As
a result, the amounts for the fiscal year ended December 31, 2022
have been retrospectively adjusted to reflect the change in thepresentation. Please refer to “Consolidated Financial Statements
and Notes to the Consolidated Financial Statements 2. BASIS OF
PREPARATION (5) Changes in Presentation (Consolidated Statementof Income)” for details of this retrospective adjustment.

Main profit indicators for the fiscal year ended
December 31, 2023
(Millions of yen, with negative amounts shown in parentheses)

Item

FY2023(Jan-Dec)

FY2022 Year-on-year(Jan-Dec)changeUnderlying operating profit

163,515

204,307(20.0)%

Operating margin

14.5%

18.4%

(390)bps

Underlying net profit
attributable to owners of theparent89,839130,835(31.3)%(Note)As a result of the conclusion of an agreement to sell the Russia
business in November 2022, operating profit (loss) related to
the Russia business arising until the completion of the sale is notincluded in the underlying operating profit for the fiscal year ended
December 31, 2023 as a one-off item. Accordingly, for the fiscal
year ended December 31, 2022, operating profit (loss) related to
the Russia business, which was previously included in the underlying
operating profit for the fiscal year ended December 31, 2022, hasbeen eliminated and reclassified.

Summary of consolidated financial results for the
fiscal year ended December 31, 2023
The Group recorded the highest net revenue forthe third consecutive fiscal year since public listingwith an increase of 2.3% year on year, boosted byexchange rate movements and M&A activities,
despite a consolidated organic growth rate of negative
4.9%. Underlying operating profit decreased by
20.0% year on year due to factors such as the decline
in organic growth and an increase in selling, generaland administrative expenses. The operating margin
shrunk by 390 bps to 14.5%.
For financial accounting purposes, operating
profit fell by 61.5% year on year to ¥45,312 million
due to factors such as an impairment loss of ¥67,804
5Dentsu Group Integrated Report 2024

Segment Overview

Organic growth rate by region (Figures in parenthesis
represent negative growth)
FY2023(Jan-Dec)

FY2023 Q4(Oct-Dec)

FY2023 Q3(Jul-Sep)

FY2023 Q2(Apr-Jun)

operating margin was 22.7% (21.5% for the previous
fiscal year), all improving year on year on the back of
the overall shift in exchange rates toward a weaker
yen, as well as M&A activities.

FY2023 Q1(Jan-Mar)

Japan

1.6%

0.9%

3.0%

3.4%

(0.2)%

Americas(7.2)%(9.3)%(6.6)%(7.4)%(4.9)%

EMEA(10.9)%(13.6)%(17.2)%(12.7)%

3.4%

APAC

(8.2)%(8.6)%(9.1)%(7.0)%(7.8)%

Consolidated(4.9)%(6.6)%(6.0)%(4.7)%(1.6)%EMEA (Europe, the Middle East and Africa excluding
Russia)In EMEA, the net revenue organic growth rate wasnegative 10.9%, due mainly to the one-off financial
impact that occurred in the context of complex
business transformations and systems integration in
the DACH (Germany, Austria, and Switzerland)cluster during the second and third quarters (the net
revenue organic growth rate after excluding this
impact was negative 7.6%). By major markets, Spainand the Netherlands performed strongly, but results
were under pressure in countries such as the UK,
Switzerland, Germany, and France. Net revenue in
EMEA was ¥237,523 million (2.0% increase year onyear), improving year on year on the back of theoverall shift in exchange rates toward a weaker yen,
as well as M&A activities. However, underlying
operating profit was ¥24,238 million (53.3% decrease
year on year), and the operating margin was 10.2%(22.3% for the previous fiscal year) due to factors
such as one-off financial impact in the DACH cluster,higher expenses associated with rising prices, andthe post-pandemic recovery.

From this fiscal year, the Group has reclassified its
reportable segments. Comparisons and analysis forthis fiscal year is based on the reportable segments
after reclassification. Please refer to Notes on theConsolidated Financial Statements (Segment andOther Information)” for details.
Japan
Conditions in the advertising market were weak, but
the CT&T domain performed robustly, achieving
double-digit growth. This led to a net revenue
organic growth rate of 1.6% and net revenue of¥448,998 million (1.8% increase year on year),marking its highest level ever for the third consecutive
fiscal year. Underlying operating profit was ¥103,440
million (2.1% decrease year on year) and theoperating margin was 23.0% (23.9% for the previous
fiscal year) due to factors such as higher expenses
associated with rising prices and the post-pandemic
recovery, as well as an increase in personnel
expenses due mainly to an increase in the numberof personnel.

APAC (Asia- Pacific excluding Japan)
The net revenue organic growth rate in APAC was
negative 8.2%. By major markets, Taiwan saw astrong performance, but the results were weaker incountries such as China, Australia, and India. Net
revenue in APAC was ¥113,235 million (0.8%increase year on year) due to the overall shift in
exchange rates toward a weaker yen, as well as M&A
activities. However, underlying operating profit was¥7,957 million (64.3% decrease year on year), andthe operating margin was 7.0% (19.8% for theprevious fiscal year) due to factors such as higher
expenses associated with rising prices, thepost-pandemic recovery, and the recording of
workforce reduction expenses.

Americas
The Americas saw a net revenue organic growth rateof negative 7.2%. By major markets, Canada andLatin America performed strongly, but the US market
reported revenue decline. The impact of a decline inmedia advertising placements by clients, particularlyin the finance and technology sectors plus delaysin CT&T projects and a deterioration in market
conditions impacted the Group. Net revenue in theAmericas was ¥322,078 million (1.6% increase year
on year), underlying operating profit was ¥73,030
million (7.1% increase year on year), and the6

Dentsu Group Integrated Report 2024

Financial Report 2024
Financial Position and Cash Flows

Financial Positionprevious fiscal year to ¥75,267 million, primarily due
to a decrease in profit before tax and an increase inworking capital.

Total assets at the end of the fiscal year decreasedby ¥107,025 million from the end of the previous
fiscal year to ¥3,634,401 million, primarily due to adecrease in cash and cash equivalents, despite anincrease in goodwill. Meanwhile, total liabilities
decreased by ¥64,453 million to ¥2,721,646 million,
primarily due to a decrease in bonds and borrowings.
Total equity decreased by ¥42,572 million to¥912,755 million, primarily due to a decrease
in retained earnings resulting from the payment
of dividends.

Net cash flow from investing activities
Net cash used in investing activities increased by¥121,950 million compared to the end of theprevious fiscal year to ¥146,297 million. This wasprimarily due to an increase in net cash paid on
acquisition of subsidiaries.
Net cash flow from financing activities
Net cash used in financing activities decreased by¥34,511 million compared to the end of the previous
fiscal year to ¥153,681 million. This was primarily
due to a net increase in short-term borrowings,
an increase in the proceeds from long-termborrowings, and a decrease in repurchase oftreasury shares, despite an increase in repayment oflong-term borrowings.

In the previous fiscal year and the current fiscal year,
primarily, assets and liabilities associated with theRussia business have been classified as non-current
assets classified as held for sale and liabilities directly
associated with non-current assets classified as held
for sale. Please refer to “Consolidated Financial
Statements and Notes to the Consolidated Financial
Statements 13. NON-CURRENT ASSETS CLASSIFIEDAS HELD FOR SALE” for details.

Analysis and discussion of operating results, etc.
from the management perspective

Maintaining a robust and flexible balance sheet is an
important issue under the Medium-Term Management
Plan, and it is the Group’s management policy tokeep net debt / underlying EBITDA at no more than
1.5x (year-end) within an indicative medium-term
range of 1.0 to 1.5x (after eliminating the impact ofapplying IFRS 16).

The forward-looking statements contained herein
are based on the judgment of the Group as ofMarch 2024.
(1) Views, analysis and discussion of financial
position and operating results

Cash flows

Please refer to “Comprehensive Business Overview”
for the Company’s views, analysis and discussion offinancial position and operating results for the fiscal
year ended December 31, 2023.

As of December 31, 2023, cash and cash equivalents(hereinafter “cash”) amounted to ¥390,678 million
compared to the ¥603,740 million posted at the endof the previous fiscal year. Cash at the end of the
fiscal year decreased by ¥213,061 million from theend of the previous fiscal year, primarily due to cashused in financing activities.

(2) Analysis and discussion of the status of cash flows
and information regarding the sources of equity
and the liquidity of funds(i) B asic approach to capital policy andfinancial strategy
During the term of the Medium-Term Management
Plan announced in February 2021, the Group will

Net cash flow from operating activities
Net cash provided by operating activities decreasedby ¥5,628 million compared to the end of the7

Dentsu Group Integrated Report 2024

we also anticipate demands on funds due to thedevelopment of new technologies and solutions,investment in innovation, and M&A and investmentin the high-growth Customer Transformation &Technology domain.

strive to contribute to solving a range of issues
faced by society by positively addressing business
opportunities triggered by societal changes. The
Group has established financial policies to ensure
financial soundness to further increase both
corporate value and shareholder value.
Regarding financial soundness, we aim to
maintain high credit ratings by keeping net
debt at no more than 1.5x underlying EBITDA(year-end) within an indicative medium-term
range of 1.0 to 1.5x (after eliminating the impact
of applying IFRS 16). We also ensure ample
liquidity on hand through internal reserves, loans
from financial institutions, corporate bonds,
commercial paper, receivables securitization,commitment lines, and other sources of funds.
Moreover, in fiscal year 2023, we also maintained
additional undrawn temporary loan commitmentswith financial institutions to prepare for unexpectedcircumstances such as a rapid change inthe external environment. In this way, we areendeavoring to maintain a high level of resilienceto dramatic changes in the business environmentand other risks.
Regarding M&A activities, capital investment
and other growth investments, we will promote
investment aimed at facilitating growth across thewhole Group, with due attention to management
stability and financial soundness.
We aim to return profits to shareholders byappropriately distributing profits gained throughthese activities and improving intrinsic corporate
value. Our dividend policy is to progressively raisethe dividend payout ratio to 35% of underlying
basic EPS by fiscal year 2024. We achieved a
dividend payout ratio of 35% in fiscal year 2023,
one year ahead of schedule.

(iii) Status of cash flows
Please refer to “Cash flows” for the status of cash
flows for the fiscal year ended December 31, 2023.
(iv) Status of financing and liquidity
The Group procures funds based on the flexible
selection of optimal methods of financing froma diverse range including internal reserves, loans
from financial institutions, corporate bonds,
commercial paper, receivables securitization,etc., based on a consideration of the market
environment at the time and the annual amounts oflong-term funds due for redemption. As a rule,
long-term funds are procured centrally throughthe Company.
The Group has also established a syndicatedcommitment line of up to ¥50,000 million for theCompany and an undrawn commitment line for
Dentsu International Limited (DI) of up to £500
million (approximately ¥90,000 million) to ensureliquidity in times of emergency. Moreover, in orderto prepare fully for any rapid changes in theexternal environment, we have also maintained
additional temporary loan commitments withfinancial institutions.
In addition, from the perspectives of centralizing
the procurement of funds within the Group,
improving capital efficiency, and ensuring liquidity,
we have introduced a cash management system
where the Group borrows funds from subsidiaries
with surplus cash and lends them to subsidiaries
experiencing a demand for funds.
The Group recognizes the maintenance andenhancement of our ability to stably procure
external funds as an important management issue,
and we have obtained a long-term credit rating of“AA-” and a short-term credit rating of “a-1+”
from the rating agency Rating and Investment
Information, Inc. (R&I). Moreover, based on the(ii) Main demands on funds
The main demands on the Group’s working
capital include the payment of media fees andproduction expenses for advertising work, as wellas personnel expenses and other selling, generaland administrative expenses.
During the term of the Medium-Term
Management Plan announced in February 2021,
8

Dentsu Group Integrated Report 2024

Financial Report 2024

performed based on the recoverable amount of
the asset. Goodwill is not amortized. Impairment
tests for goodwill are performed once a year,
irrespective of whether there is any indication thatthey may be impaired, or in cases where there is anindication of impairment. The recoverable amountof an asset or a cash-generating unit is the higherof its fair value less costs of disposal or its value in
use. Where the carrying amount of the asset or
cash-generating unit exceeds its recoverable
amount, the asset is written down to its recoverable
amount and impairment losses are recognized.
The Group applies certain assumptions regarding
factors such as the asset’s useful life, future cash
flows, growth and discount rates when estimating
value in use.
These assumptions are determined throughthe best estimates and judgments possible
based on past results and the business plansapproved by the Company’s leadership. However,they may be affected by changes in businessstrategy or the market environment. If it becomes
necessary to amend assumptions, this may havea material impact on the amount of impairment
loss recognized.
Please refer to “Consolidated Financial Statements
and Notes to the Consolidated Financial Statements
15. GOODWILL AND INTANGIBLE ASSETS (3)Impairment testing of goodwill” for the main
assumptions used in the impairment testing of
goodwill and details of sensitivity analysis.

broad, positive relationships we have built up overmany years with major financial institutions inJapan and internationally, we consider that there
should be no problem in maintaining andexpanding the Group’s businesses, securing thenecessary working capital, and procuring the funds
needed to invest in growth.
(3) Significant accounting estimates and assumptions
used in such estimates
The Company prepares its consolidated financial
statements based on the International Financial
Reporting Standards (IFRS) published by theInternational Accounting Standards Board. In
preparing the consolidated financial statements, theCompany’s leadership must disclose the reported
amounts of assets and liabilities and any contingent
liabilities or other off-balance sheet transactions asof the end of the fiscal year, and make estimates that
affect its financial position and operating results
during the reporting period. For example, theCompany’s leadership continually evaluates theoutlook and determination of matters such as
investments, business combinations, retirement
payments, income tax, contingencies, and litigation.
They make estimations and judgments based on
various factors considered reasonable in view of past
results and conditions. The results of theseestimations and judgments form the basis for the
carrying value of assets and liabilities and thereported amounts of revenue and expenses. Due tothe uncertainty inherent in estimation, actual results
may differ from estimates.
The significant estimates and assumptions thatmaterially affect the amounts recognized on the
Company’s consolidated financial statements are
as follows.

(ii) Right-of-use assets
For leases in which the Group is the lessor,
right-of-use assets and a lease obligation arerecognized at the beginning of the lease. Right-ofuse assets are measured at acquisition cost at the
beginning of the lease. After the commencement
date, the cost model is applied and measured atacquisition cost less accumulated depreciation
and accumulated impairment losses.
The Group is optimizing real estate as part ofits restructuring and is projecting the use ofsubleasing for some real estate lease agreements.
The balance of right-of-use assets related to thesereal estate lease agreements is calculated on the(i) Impairment of property, plant and equipment,
goodwill, and intangible assets
The Group assesses at the end of the reporting
period whether there is any indication that a
non-financial asset may be impaired except for
inventories and deferred tax assets. If an indicationof impairment exists, an impairment test is9

Dentsu Group Integrated Report 2024

assumptions reasonable. However, if actual results
differ from the assumptions, or if the assumptions
are amended, this may have a material impact on
the amounts of expenses and liabilities recognized.

assumptions of the basic sublease fee, theexpected rate of increase in lease payments overthe lease period, the lease incentive, and void
periods including the commencement date ofsubleasing. In the case where it becomes necessary
to revise assumptions for reasons such as changes
in the market conditions and the occurrence of
unpredictable events, an additional impairment
loss or reversal of an impairment on the right-of-use
assets may occur in the following fiscal year.

(v) Provisions
Provisions are recognized when the Group has apresent obligation (legal or constructive) as a resultof a past event, it is probable that the obligation
will be required to be settled and a reliable
estimate can be made for the amount of theobligation. Where the effect of the time value ofmoney is material, provisions are measured basedon the present value using a discount rate reflecting
the risks specific to the liability.
These provisions are calculated based on thebest estimates possible as of the end of the fiscal
year, taking uncertainty into account. However,they may be affected by unforeseeable events orchanges in circumstances, and if the actual results
differ from the estimates, this may have a material
impact on the amounts of liabilities recorded.

(iii) Valuation of financial instruments (including
contingent consideration and put
o p tio n l iab il it ies )The Group holds financial assets such as securities
and derivatives. It applies certain assumptions in
the valuation of these financial assets. Fair value isdetermined based on measurement techniquessuch as the market approach and the income
approach, in addition to market prices. Specifically,
the fair value of stocks and other financial assets forwhich an active market exists is measured basedon market prices, while the fair value of those forwhich there is no active market is evaluated using
observable market data or methods based on
unobservable inputs, mainly the income approachand the market approach.
The fair value of contingent consideration andput option liabilities arising as a result of businesscombinations is measured using the discounted
cash flow method based on unobservable inputs.
The Company’s leadership believes that theestimated fair value of financial instruments isreasonable. However, if it becomes necessary
to amend these estimates due to factors suchas unforeseeable changes in the assumptions
applied, this may have a material impact on theamounts of fair value recognized.

(vi) Recoverability of deferred tax assets
Deferred tax assets are recognized to the extent
that it is probable that taxable profits will beavailable against which carryforwards of unused
tax losses, tax credit carryforwards and deductible
temporary differences can be utilized. Deferred tax
assets are reassessed at the end of the fiscal year
and reduced by the amount of any tax benefits thatare not expected to be realized.
The Group records deferred tax assets basedon future taxable income and careful, highly feasible,and continuing tax planning consideration, and it
is judged that the estimates used in the valuationof recoverability are reasonable. However, they
may be affected by unforeseeable events orchanges in circumstances, and if the actual results
differ from the estimates, this may have a material
impact on the amounts of expenses recognized
and assets recorded.

(iv) Valuation of defined benefit obligations
Defined benefit obligations and retirement
benefit expenses are measured based on
actuarial assumptions, such as discount rates,
future compensation levels, retirement rates, andmortality rates.
The Company’s leadership believes these10

Dentsu Group Integrated Report 2024

Financial Report 2024
Business and Other Risks

activities under the direction of the Global CEO,who chairs the Group Risk Committee. With theintroduction of the “One dentsu Operating Model,”risk committees have been established under
the umbrella of the Group Risk Committee foreach of the four regions and the major functions,and a structure has been established where theGroup Risk Committee can oversee Group-widerisk management.

The major risks associated with the execution of
the Group strategies, business, and other activities
that may affect the decisions of investors are set
forth below. However, this does not represent
a complete list of risks, and the Group may beaffected in the future by risks that are not currently
foreseen or regarded as significant. In addition tominimizing the risk of future uncertain events that
may impact the achievement of the Group’s
strategies and management targets, we are engaged
in implementing various measures and mechanismsthat will enable the Group to utilize such eventsas opportunities.
The Group has identified and announced thematerial issues, materiality, for its sustainable growthand value creation in July 2023. With the introductionof the “One dentsu Operating Model,” the Group
Risk Committee, described below, progressively
reviews the main risks already identified and theirconnections with the Group’s materiality, as well as
considering the addition of new risks.
The forward-looking statements contained
herein are based on the judgment of the Group as ofMarch 2024.

Major risks and their countermeasures
Risks associated with cyclical changes in the(1) global economy and social changes
The budgets of the Group’s clients are often
dependent on business conditions, therefore theGroup’s business results can be affected by cyclicalchanges in the economy. Although the global
economy is in a moderate recovery trend, the situation
remains uncertain due to factors such as the
emergence of geopolitical risks and concerns over
the re-emergence of inflation.
The impact of the COVID-19 since 2020 has notbeen limited to the economy: it has acceleratedchanges in consumer perceptions and behavior
patterns, through the digitalization of society.
Companies, too, face the need to fundamentallytransform their business activities in ways such asbuilding D2C (Direct to Consumer) commercechannels, implementing digital transformation,and utilizing generative AI. In this context, theneeds of the Group’s clients are becoming
increasingly advanced and complex, expanding
beyond the conventional domains of advertisingand communication to areas such as the design ofcustomer experiences utilizing data and technology
to create valuable personalized experiences. The
Group’s medium- to long-term business growth may
be negatively affected if it is unable to respond
appropriately to these needs.

The Group’s Risk Management Structure
The Group has established the Group Risk Committee
to manage risks under the corporate governancesystem. Based on the Enterprise Risk Management(ERM) approach, the Group identifies and assesses
material risks for the Group management, and inorder to prevent the occurrence of risks and minimize
the impact should they arise, the Group selects risksponsors, responsible for risk response, to whom itdelegates the formulation and implementation ofrisk response plans. The Group Risk Committee
regularly reviews the risks that require response andtheir evaluation, and regularly reports on these risks
and the status of response to the Group Management
Board and the Board of Directors. Beginning in 2024,
a person responsible for global internal controls andrisk, who oversees Group-wide risk management
and internal controls, has been appointed as amember of the Group Management Team. Thismember promotes Group-wide risk management(2) R isks associated with the development of
new businesses from the medium- tolong-term perspective

11

Dentsu Group Integrated Report 2024

unable to implement an internal vision and values
that include aspects such as DEI, and as a result it isunable to sustain employee motivation.
The Group has established the vision “to be at
the forefront of people-centered transformations
that shape society” and strives to nurture an inclusive
corporate culture where all employees can makethe most of their individuality, regardless ofgender, nationality, age, sexual orientation, disability,or years of service, and thoroughly establish a
corporate climate where diversity drives competitive
strength. A Group-wide engagement survey has
been conducted on a continuing basis since fiscal
year 2021 to identify challenges in the organizationand make improvements while listening toemployees. Employee engagement scores are being
progressively reflected in executive compensation.
Since January 2023, the Group has transitioned
to a global management structure through theGroup Management Team, based on clearer
requirements for Group leadership, to accelerate
People-centered Transformation and further enhance
management sophistication. Beginning in 2024, theGroup is working to strengthen this structure throughthe appointment of the Global COO, Global
President - Global Practices, and Global President Data & Technology under the Global CEO. It is therole of leaders to firmly embed the Group’s
governance vision. From this perspective, the Grouppursuing succession planning for leadership roles
together with the establishment of training systems,in order to focus on and develop leadership to drive
its vision as well as make a positive impact on theentire organization.

In 2021, the Group announced the Medium-Term
Management Plan concluding in 2024, designed
to promptly respond to changes in the businessenvironment as described above and accurately
seize new business opportunities. The Group has
been steadily implementing the plan. Currently,
the Group is engaged in the action plan forfiscal year 2024, described under “Management
Policies, Management Environment and Issues to be
Addressed, etc.,” while also formulating the next
Medium-Term Management Plan to be announced
in the second half of fiscal year 2024. In addition to
the integration and enhancement of expertise
cultivated in the advertising marketing domain withdata and technology, one of the core pillars of thecurrent Medium-Term Management Plan is theexecution of growth strategies to support clients’business transformation. This is defined as Customer
Transformation & Technology (CT&T). In fiscal year
2023, 32% of the Group’s net revenue was sourced
from this domain. However, the Group’s businessresults may be negatively affected if the developmentof these businesses does not lead to profitability inthe medium- to long-term, for reasons such as a lackof innovation within the Group, a misreading of
consumer trends, excessively optimistic businessplans, a breakdown in negotiations with joint business
partners, insufficient management of investment
performance, or a lack of intelligence regarding
changes in the business environment.
(3) Risks related to human capital
The Group’s capacity to grow and compete depends
on enhancing its human capital by securing andretaining outstanding human talent. For this reason,
the Group may be unable to provide high-valueadded services to clients and its business results may
be negatively affected if it is unable to maintain andsecure sufficient human resources due to a tightlabor market or if it is unable to effectively establish
its reputation or brand.
Employee engagement is vital for the Group toachieve its strategic goals. It risks a decline in
employee loyalty, which makes it difficult to attract
and retain outstanding human resources if it is(4) Risks related to the business transformation
The Group continues to accelerate structuralreforms to respond to rapid changes in the businessand competitive environments. Beginning in fiscal
year 2024, the Group is progressively introducing
the “One dentsu Operating Model,” a globally
integrated business management model designed
to support further growth for clients through theglobal integration of clients’ contact points, theswifter provision of advanced practices, and the12

Dentsu Group Integrated Report 2024

Financial Report 2024(ii) Risk of loss of global clients
Many of the Group’s clients engage in businesses
on a global level. Clients often conduct bidding(global pitches) to select advertising companies
either on a global level or regional level, suchas APAC.
The Group’s revenue may decline if it is unable
to retain existing clients, and operating margin
may deteriorate if it is forced to accept orders
at lower margins than previously in order to
win pitches.
The entire Group strives to strengthen its
partnerships with global accelerator clients (keyclient companies) to improve its business acquisition
and retention rates, while ensuring that it receives
appropriate consideration for the value of theintegrated solutions it provides to its clients.

enhancement of operational efficiency. However,the Group’s business results may be negatively
affected if these structural reforms do not progressas anticipated. There is also a risk that weaknesses ininternal controls and defects in management systems
may emerge if internal systems are unable to keep
pace with changes in the business environment or
structural reforms.
(5) Risks associated with the competitive environmentand structural changes(i) Expanding competition with other industries
In recent years, in addition to other corporategroups in the same advertising industry and digitalagency groups, the Group has been exposed to
new competition with other industries such as
consulting and technology companies. Clientdemands for more efficient, optimized advertisingand marketing activity are becoming stronger,
and the Group faces rising demands for marketingand communication customized to individual
consumers. In this context, the Group increasinglycompetes with companies in the data analytics,
customer experience, and consulting domains.
Looking ahead, part of the Group’s revenue
may be taken by competitors from other industries
if the borders between the advertising marketingdomain, and other domains become blurred andcompetition with other industries becomes more
intense. Moreover, the Group may not be able tofully capture business in the convergence ofmarketing, technology and consulting if it is unable
to effectively establish its reputation and brand as
a leading player in this domain.
Perceiving these changes in the industry
structure as business opportunities, the Groupplans to integrate and enhance the expertise andcreativity it has cultivated in the advertisingmarketing domain with data and technology,
establishing business models that offer Integrated
Growth Solutions that utilize consumer intelligence,as well as providing end-to-end integrated services
from strategy to implementation. The Group alsoplans to focus on developing its human resources.

(iii) Risks associated with structural changes in the
media environment
The media environment that surrounds consumers
is undergoing a significant shift to digital technology
on a global level, against the backdrop of innovation.
The Group perceives these structural changes in
the media environment as business opportunities.
However, if the Group is unable to swiftly
respond to structural changes in the media
environment, or if it is unable to adopt terms andforms of transaction that are appropriate in view ofsuch changes, this may lead to issues such as theloss of revenue from media and damage torelationships with clients, which may negatively
affect the Group’s business results. Moreover,these structural changes in the media environment
are progressing at differing speeds across eachcountry and region, therefore the Group must plan
appropriately, responding flexibly in each market.
(iv) Risks related to the content business
The Group is engaged in the content businessboth in Japan and internationally, including
investment in the production of movies and thepurchase and sale of broadcasting rights for
sporting events, etc. In many cases, payments inthe content business must be made before income
is received, and income and expenditure plans
13

Dentsu Group Integrated Report 2024

(7) R isks related to information security andcyber security

span several years. Moreover, large financial
commitments are sometimes necessary to acquiresponsorship rights or broadcasting rights for large
sporting events and the like.
The Group has been involved in the content
business domain for many years and possesses theinsight to formulate income and expenditure plans
with a certain degree of accuracy. Moreover, many
content business projects are managed as
portfolios to diversify content business risks.
However, it is difficult to completely predict the
response of consumers, which substantially affects
income in the content business. The Group’sbusiness results may be negatively affected if
projects do not progress in line with income andexpenditure plans, or if sponsorship rights or
broadcasting rights can only be sold for a lower
amount than the Group paid to purchase them.

In the course of its business operations, the Groupfrequently receives information on the products,
services, and businesses of its clients that has notbeen publicly disclosed. The Group has obtained
certification under the international standard for
information security management systems andtakes every reasonable precaution in managing
information. However, in the unlikely incidents suchas an information leak, the Group’s credibility would
be damaged and its business results may be
negatively affected.
Moreover, it is possible that unforeseen
external cyber attacks or actions by employees or
suppliers may threaten the confidentiality, integrity,
and accessibility of important business systems anddata, which may have a significant operational,
regulatory, financial or reputational impact on theGroup and its clients.
The Group has established a Group security
function encompassing the security divisions from its
Japan and international networks to ensure adecisive response to security risks. It continuallyassesses the materiality of developing threats andevaluates the effectiveness of risk management andcontrol in line with the ERM approach.

(6) Impairment risk of goodwill and intangible assets
The Group carries a large amount of goodwill andintangible assets associated with its acquisition of
Aegis Group plc, a major UK-based advertising
company, in March 2013 and the subsequentacquisition of several companies on a global level.
The Group manages these acquisitions throughregular reviews of investment return and goodwill
impairment tests, which are conducted wheneverindications of impairment are recognized, as well as
annually during the fourth quarter regardless ofwhether there are indications of impairment, toprevent any unexpected large-scale deterioration in
investment performance. During the fiscal year, theGroup conducted goodwill impairment tests basedon the latest business plans, taking account of
up-to-date results. As a result, the Group recognized
an impairment loss of ¥67,804 million on the entire
goodwill and some intangible assets of the group of
cash-generating units to which the goodwill for
APAC had been allocated. The Group’s businessresults and financial position may be negatively
affected if another large impairment loss is recorded
as a result of future impairment tests.

(8) Sustainability-related risks
The Group has updated the 2030 Sustainability
Strategy that it established in January 2021 to reflect
the five issues identified as “Group materiality” —Business ethics & Compliance and Data security,
DEI, Human capital development, Climate action,and Innovation leadership. It promotes measures
aimed at achieving the index targets set forth in thestrategy, including environmental, social, governance,and business targets.
However, the Group’s reputation and otherattributes may be negatively affected if theachievement of these targets does not progress asplanned due to external factors such as the socialand economic environment.
From 2024, a Global Chief Sustainability Officer
14

Dentsu Group Integrated Report 2024

Financial Report 2024

or rules will negatively affect the Group’s business.
However, the Group’s credibility may be damaged
and its business results may be negatively affectedin the unlikely event of an incident such as apersonal information leak. Moreover, the Group’sbusinesses may be negatively affected if its
utilization of personal data is constrained due tothe amendment of laws, regulations, or rules, orfrom the standpoint of ethics, and it becomesunable to provide some products or services to
its clients.

has been appointed to oversee the implementationof climate change risk response and other aspects ofthe strategy.
(9) R isks related to laws and regulations,litigation, etc.
(i) Risks related to violations of labor laws andregulations
The Group endeavors to establish a work
environment that ensures the mental andphysical well-being of all employees as one ofits top management priorities. However, theGroup’s business results may be negatively
affected if it cannot maintain this work environment,
as a situation may arise where the motivationand performance of the Group’s employees
deteriorate, the Group fails to retain outstanding
employees, and it becomes difficult to acquire
diverse human resources. Despite steady
improvements in the labor environment for
employees in Japan due to the labor environment
reforms that the Group, focused on its whollyowned subsidiary Dentsu Inc., has engaged insince fiscal year 2017, the Group’s reputation may
be significantly damaged if any labor-management
scandals reoccur.

(iii) Risks related to litigation, etc.
The Group engages in businesses across a broad
range of domains, both in Japan and internationally,
which involve the risk of receiving claims anddemands for surcharge payment, etc. fromgovernment bodies, clients, media companies,
partner companies, and others based oninvestigations, litigation, media audits, etc.
Regarding the incident related to the Tokyo
2020 Olympic and Paralympic Games, describedin the Financial Report 2023, the dentsu Japan
Reform Committee is implementing and promoting
the measures established as “Mindset andBehavior Reform,” aimed at raising awareness of
the Group’s social responsibilities and improving
transparency, as well as clarifying the rules andprocesses to be complied with, based on
the recommendations of the Investigation andReview Committee.

(ii) Risks related to personal and other information(data governance)
In the course of its business operations, theGroup sometimes receives personal information
regarding the existing and potential customers of
its clients. It also develops products and services
utilizing personal data and provides these to its
clients in the context of the rising demand formarketing and communication customized foreach individual consumer from the clients.
The Group complies with laws and regulations,both in Japan and internationally, including the Act
on the Protection of Personal Information and the
EU General Data Protection Regulation, andresponds promptly to amendments to these laws
and regulations. It has also established Group-wide
Global Data Protection Guidelines, and does not,at present, anticipate that these laws, regulations,(10) Risks related to disasters and accidents, andgeopolitical risks
The business activities of the Group or its trading
partners may be negatively impacted and theGroup’s business results may be negatively affectedin the event of a natural disaster, a disruption inelectrical power or other social infrastructure, abreakdown in communications or broadcasting, adisruption in the distribution of goods, a large-scale
accident, plague, pandemic, war, terrorism, politicalunrest, social unrest or similar issue in a region where
the Group carries out or develops its businesses.
The Group regularly reviews crisis management
15

Dentsu Group Integrated Report 2024

and business continuity plans (BCP) for the issues
described above that are expected in each region
and market.

16

Dentsu Group Integrated Report 2024

Financial Report 2024
Consolidated Financial Statements
Consolidated Statement of Financial Position
Dentsu Inc. and Consolidated Subsidiaries
December 31, 2023

ASSETS

Notes

FY2022(As of December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

CURRENT ASSETS:
Cash and cash equivalents

8, 35¥603,740¥390,678$2,774

Trade and other receivables

9, 25, 35

1,531,957

1,524,289

10,823Inventories

10

Income tax receivables

3,670

6,396

45

46,96452,194371
164

Other financial assets

11, 19, 35

18,731

23,135

Other current assets

12

55,22662,482444

2,260,291

2,059,176

14,621

Subtotal
Non-current assets classified as held for sale

13

Total current assets

57,20580,380571

2,317,496

2,139,557

15,191NON-CURRENT ASSETS:
Property, plant and equipment

2, 14

26,57729,430209

Goodwill

7, 15

749,755

831,1215,901

Intangible assets

2, 7, 15

211,247

238,733

1,695

Right-of-use assets

2, 16

143,379

139,252989

Investments accounted for using the equity method

6, 17

47,51551,227364

11, 25, 35

168,386

133,766

950

Other non-current assets

22

20,241

22,126

157

Deferred tax assets

18

56,82749,185349

1,423,931

1,494,844

10,614¥3,741,427¥3,634,401$25,805

Other financial assets

Total non-current assets
TOTAL ASSETS

6

17

Dentsu Group Integrated Report 2024

Consolidated Statement of Financial Position
Dentsu Inc. and Consolidated Subsidiaries
December 31, 2023

LIABILITIES AND EQUITY(Millions of Yen)

(Millions of U.S. Dollars)

Notes

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

LIABILITIES:CURRENT LIABILITIES:
Trade and other payables

19, 35¥1,532,591¥1,527,612$10,846

Bonds and borrowings

20, 35

95,79039,213278

Other financial liabilities

16, 20, 35, 37

92,237

71,117505

30,89428,088

199

Income tax payables
Provisions

21

12,70018,072

128

Other current liabilities

25

215,740

189,278

1,344

1,979,955

1,873,383

13,30137,74066,527472

2,017,696

1,939,910

13,774

Subtotal
Liabilities directly associated with non-current
assets classified as held for sale

13

Directly related liabilities
NON-CURRENT LIABILITIES:
Bonds and borrowings

20, 35436,639455,232

3,232

Other financial liabilities

16, 20, 35

222,811236,357

1,678

Liability for retirement benefits

22

23,991

18,120129

Provisions

21

21,88718,046

128

Other non-current liabilities

34

7,333

5,640

40

Deferred tax liabilities

18

55,74048,337343

Total non-current liabilities
Total liabilities

768,403781,735

5,551

2,786,099

2,721,646

19,324530

EQUITY:
Share capital

23

74,60974,609

Share premium account23

74,93175,072

533

Treasury shares

23(25,478)(24,964)(177)

Other components of equity

13

135,786

148,180

1,052

Retained earnings

23

620,418

568,753

4,038

Total equity attributable to owners of the parent

35

880,267

841,651

5,976

Non-controlling interests

7, 23

75,06071,104

505

955,327

912,755

6,481¥3,741,427¥3,634,401$25,805

Total equity
TOTAL LIABILITIES AND EQUITY

18

Dentsu Group Integrated Report 2024

Financial Report 2024

Consolidated Statement of Income
Dentsu Inc. and Consolidated Subsidiaries
December 31, 2023

(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)(126,881)(159,732)(1,134)

1,119,519

1,144,819

8,129(950,768)(1,018,730)(7,233)(33,941)
16,826(35,972)
4,382(2,429)117,617(9,992)100(72,201)
3,028(1,710)45,312

(71)
1
(513)
21
(12)
322

17

3,418

3,654

26

17

(5,950)

–

–

17
7, 17

600
5,467
121,153(194)
142
48,914

(1)
1
347

30
16, 22, 27, 30

19,701(39,947)
100,908

22,199(38,009)
33,103

158
(270)
235

18

(34,982)¥65,925(38,572)¥(5,468)

(274)
$(39)

¥59,847¥6,077¥(10,714)¥5,245

$(76)
$37

(Yen)

(U.S.Dollars)

Notes

Revenue
Cost of sales
Net revenue
Selling, general and administrative expenses
Restructuring cost
Gain on sale and retirement of non-current assets
Impairment loss
Other income
Other expenses
Operating profit
Share of profit of investments accounted for using
the equity method
Impairment loss of investments accounted forusing the equity method
Gain (loss) on sale of investments in associates
Revaluation gain on step acquisition
Profit before interest and tax
Finance income
Finance expenses
Profit before tax
Income tax expenses
Profit (loss) for the year

2, 6, 25
14, 15, 16,
22, 27
6¥1,246,401

14, 15, 16, 22,
26, 27, 34
14, 15, 21, 27
16
13, 14, 15
2, 28
2, 29
6

Profit (loss) attributable to:
Owners of the parent
Non-controlling interests
Earnings (loss) per share
Basic earnings (loss) per share
Diluted earnings (loss) per share

Reconciliation from operating profit to underlying operating profit
Notes

Operating profit
Amortization of intangible assets incurred inacquisitions
Selling, general and administrative expenses
Restructuring cost
Gain on sale and retirement of non-current assets
Impairment loss
Other income
Other expenses
Underlying operating profit (Note 1)

(Yen)

32
32

¥223.33¥221.96¥1,304,552¥(40.52)¥(40.52)$9,263$(0.29)$(0.29)(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended December
31, 2022)

FY2023(Year ended December
31, 2023)

FY2023(Year ended December
31, 2023)

28,721

30,691

218

3,701
33,941(16,826)
35,972(584)
1,763¥204,307

5,780
9,992
(100)
72,201(1,622)
1,259¥163,515

41
71
(1)
513
(12)
9
$1,161¥117,617

13, 14, 15

6¥45,312(Note 1) For the definition of underlying operating profit, refer to ”3. MATERIAL ACCOUNTING POLICIES (20) Underlying Operating Profit.”

19

Dentsu Group Integrated Report 2024

$322

Consolidated Statement of Comprehensive Income
Dentsu Inc. and Consolidated Subsidiaries
December 31, 2023

Notes

PROFIT (LOSS) FOR THE YEAR(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥65,925¥(5,468)$(39)

OTHER COMPREHENSIVE INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED TO PROFIT
OR LOSS:Net change in financial assets measured at fair value
through other comprehensive income

31, 35(40,703)

13,61297

Remeasurements of defined benefit plans

22, 31

5,393

12,192

87

Share of other comprehensive income of investments
accounted for using the equity method

17, 31

152

127

1

ITEMS THAT ARE OR MAY BE RECLASSIFIED TO
PROFIT OR LOSS:
Exchange differences on translation of foreign
operations

31

39,6948,956

64

Effective portion of the change in the fair value ofcash flow hedges

31

26,329(16,254)

(115)

33

202

1

Share of other comprehensive income of investments
accounted for using the equity method

17, 31Other comprehensive income, net of tax

30,897

18,837134

COMPREHENSIVE INCOME FOR THE YEAR

¥96,823¥13,368$95¥96,248¥8,219$58¥575¥5,148$37

COMPREHENSIVE INCOME FOR THE YEARATTRIBUTABLE TO:
Owners of the parent
Non-controlling interests

20

Dentsu Group Integrated Report 2024

Financial Report 2024

Consolidated Statement of Changes in Equity
Dentsu Inc. and Consolidated Subsidiaries
December 31, 2023

(Millions of Yen)
Total equity attributable to owners of the parent
Other components of equity
Notes

As of January 1, 2022
Profit (loss) for the year
Other comprehensive income
Comprehensive income for the year
Repurchase of treasury shares
Disposal of treasury shares
Cancellation of treasury stock
Dividends
Transactions with non-controlling shareholders
Transfer from other components of equity to retained
earnings
Other
Transactions with owners—total
As of December 31, 2022
Profit (loss) for the year
Other comprehensive income
Comprehensive income for the year
Repurchase of treasury shares
Disposal of treasury shares
Dividends
Transactions with non-controlling shareholders
Transfer from other components of equity to retained
earnings
Other
Transactions with owners—total
As of December 31, 2023

Exchange differences
Share capital Share premium
account Treasury shareson translation offoreign operations¥74,609¥77,864¥(64,603)–––(40,006)
149
78,981

31
23
23
23
24
23

(88)
(5,646)¥31,465
38,30938,309Effective portion of
the change in thefair value of cash
flow hedges

Net change in financial
assets measured at fairvalue through othercomprehensive income

26,32526,325(33,627)(33,627)¥12,199¥37,759

23,355–¥74,609

2,803(2,932)¥74,931

–

–

31

(319)

23
24

39,124¥(25,478)

–
(4)
518

–
¥69,774–¥38,524

23,355¥27,487

7,830
7,830

(16,255)(16,255)

15,167
15,167

5,652–¥74,609459
140¥75,072513¥(24,964)–¥77,604–¥22,268

5,652¥48,306(Millions of U.S. Dollars)
Total equity attributable to owners of the parent
Other components of equity
Notes

As of January 1, 2022
Profit ( loss) for the year
Other comprehensive income
Comprehensive income for the year
Repurchase of treasury shares
Disposal of treasury shares
Disposal of treasury shares
Dividends
Transactions with non-controlling shareholders
Transfer from other components of equity to retained
earnings
Other
Transactions with owners—total
As of December 31, 2022
Profit (loss) for the year
Other comprehensive income
Comprehensive income for the year
Repurchase of treasury shares
Disposal of treasury shares
Dividends
Transactions with non-controlling shareholders
Transfer from other components of equity to retained
earnings
Other
Transactions with owners—total
As of December 31, 2023

Exchange differences
Share capital Share premium
account Treasury shareson translation offoreign operations

$530

$553

$(459)

–

–

–
(284)
1
561

31
23
23
23
24
23

(1)
(40)

$223
272
272

Effective portion of
the change in thefair value of cash
flow hedges

Net change in financial
assets measured at fairvalue through othercomprehensive income

187
187

(239)
(239)

$87

$268

166
–
$530

20
(21)
$532

–

–

31

(2)

23
24

278
$(181)

–
0
4

–
$495

–
$274

166
$195

56
56

$(115)$(115)

108
108

40
–
$530
21

3
1
$533

Dentsu Group Integrated Report 2024

4$(177)

–
$551

–
$158

40
$343

Total equity attributable to owners of the parent
Other components of equity
Notes

As of January 1, 2022
Profit (loss) for the year
Other comprehensive income
Comprehensive income for the year
Repurchase of treasury shares
Disposal of treasury shares
Cancellation of treasury stock
Dividends
Transactions with non-controlling shareholders
Transfer from other components of equity to retained
earnings
Other
Transactions with owners—total
As of December 31, 2022
Profit (loss) for the year
Other comprehensive income
Comprehensive income for the year
Repurchase of treasury shares
Disposal of treasury shares
Dividends
Transactions with non-controlling shareholders
Transfer from other components of equity to retained
earnings
Other
Transactions with owners—total
As of December 31, 2023

Retainedearnings

Total¥81,423–
36,40036,400–––––¥675,739
59,847¥845,034
59,84736,40096,248(40,006)
61–(37,035)
13,897

17,962(17,962)––
17,962¥135,786–
18,934
18,934
–
–
–
–

(733)
(115,169)¥620,418(10,714)2,069(61,014)¥880,267(10,714)18,934
8,219
(4)
199
(43,229)(3,556)(12,192)(6,540)6,540(12,192)––(6,540)¥148,180(704)(40,949)¥568,753

Remeasurementsof defined benefit
plans

–
31
23
23
23
24
23

5,392
5,392

(5,392)(5,392)–
31

12,192
12,192

23
24

Total

59,847(73,334)(37,035)
13,897(10,714)(43,229)(3,556)

As of January 1, 2022
Profit ( loss) for the year
Other comprehensive income
Comprehensive income for the year
Repurchase of treasury shares
Disposal of treasury shares
Disposal of treasury shares
Dividends
Transactions with non-controlling shareholders
Transfer from other components of equity to retained
earnings
Other
Transactions with owners—total
As of December 31, 2022
Profit (loss) for the year
Other comprehensive income
Comprehensive income for the year
Repurchase of treasury shares
Disposal of treasury shares
Dividends
Transactions with non-controlling shareholders
Transfer from other components of equity to retained
earnings
Other
Transactions with owners—total
As of December 31, 2023

Remeasurementsof defined benefit
plans

–
31

38
38

23
23
23
24
23

(38)
(38)
–
87
87

31

23
24

(3,763)
14,885––(9,105)¥71,104(245)(55,940)¥912,755(1,077)
10,044¥75,060
5,245
(97)
5,148

(Millions of U.S. Dollars)$4,798
425

(521)
(263)
99

$6,000
425
258
683
(284)
0
–
(263)
99

128

(128)

–

–
128
$964
–
134
134
–
–
–
–

(5)
(818)
$4,405
(76)

15
(433)
$6,250
(76)
134
58
0
1
(307)
(25)

(307)
(25)

¥909,474
65,92530,897
96,823(40,006)
61–(40,799)
28,782

–

$578
–
258
258
–
–
–
–
–

(76)

¥64,440
6,077(5,502)575(245)(46,835)¥841,651

Total

425

Total equity(4,812)(4,292)Retainedearnings

Total

Non-controllinginterests

992(50,969)¥955,327(5,468)18,837
13,368(4)
199(48,041)(7,849)Total equity attributable to owners of the parent
Other components of equity
Notes(Millions of Yen)

Non-controllinginterests

$458
43
(39)
4

(27)
106

Total equity$6,457
468
219
687
(284)
0
–
(290)
204
–

(8)
71
$533
37
(1)
37

(34)
(30)

7
(362)
$6,783
(39)
134
95
0
1
(341)
(56)

(65)
$505

(87)

(46)

46

–

–

(87)
–

–
(46)
$1,052(5)(291)$4,038(2)(333)$5,976(2)(397)$6,48122

Dentsu Group Integrated Report 2024

Financial Report 2024

Consolidated Statement of Cash Flows
Dentsu Inc. and Consolidated Subsidiaries
December 31, 2023

Notes

CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax
ADJUSTMENTS FOR:
Depreciation and amortization
Impairment loss
Interest and dividend income
Interest expense
Share of profit of investments accounted for using the equity method
Impairment loss of investments accounted for using the equity method
Revaluation (gain) loss on contingent consideration and put option
liabilities
Loss (gain) on sale and retirement of non-current assets
Revaluation (gain) loss on step acquisition(Gain) loss on valuation of securities
Increase (decrease) in liability for retirement benefits
Increase (decrease) in provision of restructuring cost
Other — net
Cash flows from operating activities before adjusting changes inworking capital and others
CHANGES IN WORKING CAPITAL:(Increase) decrease in trade and other receivables(Increase) decrease in inventories(Increase) decrease in other current assets
Increase (decrease) in trade and other payables
Increase (decrease) in other current liabilities(Increase) decrease in working capital
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash flows from operating activities

6, 14, 15,
16, 2613, 14, 15
30
30(Millions of Yen) (Millions of U.S. Dollars)
FY2023
FY2023(Year ended(Year ended
December 31, 2023)
December 31, 2023)¥100,908¥33,103$235

74,17078,719559

35,972(4,935)22,203(3,418)5,950

72,201(9,187)29,487(3,654)
–

513
(65)
209
(26)
–

12,1632,282

16(16,826)(5,467)(11,413)
306
4,448
1,173

(100)
(142)
987
(1,521)(4,337)
(79)

(1)
(1)
7
(11)
(31)
(1)

215,234

197,760

1,404

17,533
16,975
14,893(17,405)(35,515)(3,518)211,716
2,210
3,246(20,511)(115,764)
80,89670,241(2,188)(2,300)(83,218)(42,873)(60,340)
137,419
9,858
6,032(30,441)(47,601)
75,267

499
(16)
(16)
(591)
(304)
(428)
976
70
43
(216)
(338)
534

(18,526)(28,892)(205)

13,941

1,269

9

7

(39,173)(1,700)(10,477)
28,572
3,017(24,346)(136,556)
12(6,877)
24,071
677(146,297)

(970)
0
(49)
171
5
(1,039)

20
20
20
20
16, 20(5,832)
610(55,791)–(35,748)

12,884
221,000(258,824)(35,000)(36,367)

91
1,569(1,838)
(249)
(258)

20

(12,025)(13,144)

(93)

23
24

(40,006)(37,035)(4,106)
1,744(188,192)(4)(43,229)(4,812)
3,815(153,681)

0
(307)
(34)
27
(1,091)

30
7
30

16

CASH FLOWS FROM INVESTING ACTIVITIESPayments for purchase of property, plant and equipment, intangible
assets and investment property
Proceeds from sale of property, plant and equipment, intangible
assets and investment property
Net cash (paid) received on acquisition of subsidiaries
Net cash (paid) received on sale of subsidiaries
Payments for purchases of securities
Proceeds from sales of securities
Other — net
Net cash flows from investing activities
CASH FLOWS FROM FINANCING ACTIVITIESNet increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Redemption of bonds
Repayments of lease obligations
Payments for acquisition of interest in subsidiaries from
non-controlling shareholders
Payments for repurchase of treasury shares
Dividends paid
Dividends paid to non-controlling shareholders
Other — net
Net cash flows from financing activities

FY2022(Year ended
December 31, 2022)

6

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF FISCAL YEAR
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
INCLUDED ASSETS CLASSIFIED AS HELD FOR SALE
CASH AND CASH EQUIVALENTS AT END OF FISCAL YEAR

8

23

13,932

11,117

79(117,710)
723,541(213,593)
603,740(1,517)4,287

13(2,091)531

4

8¥603,740¥390,678$2,774

Dentsu Group Integrated Report 2024

Notes to Consolidated Financial Statements
Dentsu Inc. and Consolidated Subsidiaries

1. REPORTING ENTITY“Right-of-use assets,” which had been presented under “Property,

Dentsu Group Inc. (hereinafter referred to as the “Company”) is aplant and equipment” and ”Intangible assets” as of December

joint stock corporation under the Companies Act of Japan located31, 2022, are presented separately as of December 31, 2023,

in Japan.

for clarification. To reflect this change in the presentation, theThe address of the Company’s registered corporate

Consolidated Statement of Financial Position as of December 31,

headquarter is available on the Company’s website (https://www.

2022 has been reclassified.
As a result, the ¥168,859 million presented under “Property,

group.dentsu.com/jp/).
The details of businesses and principal business activities

plant and equipment” and the ¥212,345 million under ”Intangibleof the Company and its subsidiaries (hereinafter referred to as

assets” in non-current assets in the Consolidated Statement of

the “Group”) are stated in “Comprehensive Business Overview”

Financial Position as of December 31, 2022 have been reclassified

and “Subsidiaries.”as ¥26,577 million under “Property, plant and equipment” andThe consolidated financial statements of the Group for the¥211,247 million under ”Intangible assets” and ¥143,379 million

fiscal year ended December 31, 2023 have been approved byunder “Right-of-use assets.”

Hiroshi Igarashi, Representative Executive Officer, President &Global CEO, and Arinobu Soga, Representative Executive Officer,(Consolidated Statement of Income)Executive Vice President, Global CGO & Global CFO, on May

Profit distribution from the content business which has been

14, 2024.

presented under ”Other income” has been included in “Revenue”
for the fiscal year ended December 31, 2023. Moreover,

2. BASIS OF PREPARATION

amortization of long-term prepaid expenses, etc., which had been

(1) Compliance with the International Financial Reporting Standards

presented under “Other expenses” as expenses related to the said

(hereinafter referred to as “IFRS”)

profit distribution, has been included in “Revenue” as a deduction

The Company’s consolidated financial statements meet all of theitem of revenue.

requirements of Article 1-2 “Designated IFRS Specified Company”

This change is intended to present the results of the Group’s

and are prepared in accordance with IFRS under the provisions ofsales activities more appropriately, as the renewal of contracts has

Article 93 of the Ordinance on Consolidated Financial Statements.

led to an increased contribution by the Group’s sales activities.

(2) Basis of Measurement

resulted from deducting ¥3,891 million of amortization of long-term

The consolidated financial statements are prepared on the

prepaid expenses and ¥392 million of other expenses included

historical cost basis, except for financial instruments and others

in “Other expenses” from ¥6,801 million of profit distribution

stated in “3. MATERIAL ACCOUNTING POLICIES.”

included in “Other income,” was reclassified into “Revenue” inTo reflect this change in the presentation, ¥2,517 million, which

the Consolidated Statement of Income for the fiscal year ended(3) Functional Currency and Presentation Currency

December 31, 2022. However, the reclassification has no impact

The consolidated financial statements are presented in Japaneseon operating profit and profit before tax for the fiscal year ended

yen, which is the functional currency of the Company.

December 31, 2022.

For the convenience of readers outside Japan, theaccompanying Consolidated Financial Statements are also

3. MATERIAL ACCOUNTING POLICIES

presented in United States dollars by translating Japanese yen(1) Basis of Consolidation

amounts at the exchange rate of ¥140.84 to U.S.$1, the approximate

A. Subsidiaries

rate of exchange at the end of December 31, 2023. Such translations

A subsidiary is an entity controlled by the Group. An entity is treatedshould not be construed as representations that the Japanese yen

as a subsidiary if the Group is deemed, in principle, to have control

amounts could be converted into United States dollars at the above

over that entity when it holds a majority of the voting rights of thator any other rate.

entity. An entity is treated as a subsidiary even if the Group holds
less than a majority of the voting rights of the entity, where control

Amounts less than one million yen have been rounded down
to the nearest million yen and those less than one million U.S.

is deemed to be achieved when the Group is exposed, or has rights,

dollars have been rounded to the nearest million U.S. dollars in

to variable returns from its involvement with the entity and has thethe presentation of the accompanying consolidated financial

ability to affect those returns through its power over the entity.
Consolidation of a subsidiary begins when the Group obtains

statements. As a result, the totals in yen and U.S. dollars do notcontrol over the subsidiary and ceases when the Group loses

necessarily agree with the sum of the individual amounts.

control of the subsidiary. In cases where the accounting policies(4) Early Adoption of New Standards

adopted by a subsidiary are different from those adopted by

There are no early adoption of standards.

the Group, adjustments are made to the subsidiary’s financial
statements, as necessary, to conform with the accounting policies
adopted by the Group.

(Consolidated Statement of Financial Position)
24

Dentsu Group Integrated Report 2024

Financial Report 2024

A change in the ownership interest in a subsidiary without

method. Consideration transferred in a business combination isa loss of control is accounted for as an equity transaction, andmeasured as the sum of the acquisition-date fair value of the assets

any difference between the amount by which the non-controllingtransferred, the liabilities assumed and equity instruments issued

interests are adjusted and the fair value of the consideration paidby the Company in exchange for control over an acquiree andor received is recognized directly in equity as equity attributable toincludes contingent consideration when appropriate.

owners of the Company.

At the acquisition date, the identifiable assets and liabilities are

When the Group loses control of a subsidiary, any resulting

recognized at their fair value, except that:gain or loss is recognized in profit or loss.

 eferred tax assets or liabilities, and assets or liabilities, which(i) D
are related to employee benefit arrangements, are recognized

B. Associates and Joint Venturesand measured in accordance with International Accounting

An associate is an entity over which the Group has significant

Standards (hereinafter referred to as “IAS”) 12 “Income Taxes”

influence in respect to the financial and operating policies but does

and IAS 19 “Employee Benefits,” respectively.

not have control. When the Group holds between 20% and 50% of(ii) A ssets or disposal groups that are classified as held-for-salethe voting rights, the entity is, in principle, treated as an associate.

under IFRS 5 “Non-current Assets Held for Sale and Discontinued

When the Group holds less than 20% of the voting rights of the

Operations” are measured in accordance with such standard.

entity but is determined to have significant influence over the entity,

Any excess of the consideration of acquisition over the fairsuch as through delegation of officers, the entity is treated asvalue of identifiable assets and liabilities is recognized as goodwill.

an associate.

If the consideration of acquisition is lower than the fair value of

A joint venture is an entity in which two or more parties,

the identifiable assets and liabilities, the difference is immediately

including the Group, have contractually agreed to sharing of control

recognized in profit.
If the initial accounting for a business combination isof an arrangement and have rights to the net assets of the joint
venture, and in which unanimous consent of the controlling parties

incomplete by the end of the reporting period in which theis required to make decisions on relevant business activities.

combination occurs, provisional amounts of incomplete items

The Group’s investments in associates and joint ventures

are measured based on best estimates. Provisional amounts

are accounted for using the equity method. The investments areare adjusted retrospectively to reflect new information obtained

measured as the carrying amount (including goodwill recognized

during the measurement period, within one year from the dateupon acquisition) determined using the equity method lessof acquisition, that, if known, would have affected the amounts

accumulated impairment losses.

recognized at that date.

The consolidated financial statements include the Group’s

The contingent consideration is recognized at fair value at theshare of changes in profit or loss and other comprehensive income

time of acquisition and the change in fair value after acquisition isof an associate and joint venture from the date of acquisition ofreflected as an adjustment to the consideration transferred whensignificant influence or joint control until the date such influence or

the change qualifies as adjustment during the measurement period,

control is lost. In cases where the accounting policies adopted byotherwise the change is recognized in profit or loss.
The Group elects to measure non-controlling interests

an associate or joint venture are different from those adopted by
the Group, adjustments are made to the associate or joint venture’s

at either fair value or based on the proportionate share in thefinancial statements, as necessary, to conform with the accounting

recognized identifiable net asset amounts for each business

policies adopted by the Group.

combination transaction.

If application of the equity method ceases as a result of theAcquisition-related costs incurred to achieve a businessloss of significant influence on associates or joint ventures, gain or

combination are recognized as expenses when incurred, with theloss on the sales of shares is recognized in profit or loss, and theexception of costs related to the issuance of debt instruments andvaluation difference arising from remeasurement of the residual

equity instruments.
The Group continuously accounts for all businessshares at fair value is recognized in profit or loss in the same period

combinations under common control based on carrying amounts.

the significant influence is lost.

A business combination under common control is a business
C. Transactions Eliminated Under Consolidation

combination in which all of the combining companies or businesses

All intragroup balances, transactions, and unrealized gains resulting

are ultimately controlled by the same company, both before andfrom intragroup transactions are eliminated on consolidation.

after the combination, and the control is not temporary.

Unrealized gains resulting from transactions with associates andjoint ventures are deducted from investments, to the extent it does(3) Foreign Currency Translation

not exceed Company’s share in an investee.

A. Translation of Foreign Currency Transactions
Foreign currency transactions are translated into each functional(2) Business Combinations

currency of the group entity using the exchange rate at the date ofBusiness combinations are accounted for using the acquisition

the transaction.
25

Dentsu Group Integrated Report 2024

At the end of each reporting period, monetary assets anddesignated as financial assets measured at fair value through otherliabilities denominated in foreign currencies, and non-monetarycomprehensive income at the time of initial recognition.

assets and liabilities denominated in foreign currencies carried at

All financial assets are measured at fair value plus transaction

fair value are translated into the functional currency at the closing

costs that are directly attributable to such financial assets, except

rate, and the resulting exchange differences are recognized in profit

for when they are classified as financial assets measured at fair value

or loss.

through profit or loss.

Non-monetary items denominated in foreign currencies aretranslated at the exchange rate at the date of transaction.

(ii) Subsequent Measurement
After initial recognition, financial assets are measured based on the

B. Translation of Foreign Operationsclassification as follows:

For financial statements of foreign operations such as subsidiaries,(a) Financial Assets Measured at Amortized Cost

assets and liabilities are translated into Japanese yen using theSubsequent to initial recognition, financial assets are measured atclosing rate of the reporting period, and revenue and expenses areamortized cost using the effective interest rate method.

translated into Japanese yen using the average rate of the reporting(b) Financial Assets Measured at Fair Value through Profit or Lossperiod unless there are significant changes in the exchange

Subsequent to initial recognition, financial assets are remeasured

rate. Resulting translation differences are recognized in otherat fair value at each reporting period end. Changes in fair value andcomprehensive income, and cumulative differences are recognizedincome such as dividends are recognized in profit or loss.

in other components of equity.

 inancial Assets Measured at Fair Value through Other(c) F

When a foreign operation of the Group is disposed of,Comprehensive Income

cumulative translation differences relating to that foreign operation

Changes in fair value subsequent to initial recognition are

are transferred to profit or loss.

recognized in other comprehensive income, and are transferred
to retained earnings if a financial asset is derecognized or the fair

(4) Financial Instruments

value declined significantly. Dividends derived from these financial

A. Non-derivative Financial Assets

assets are recognized in profit or loss.

(i) Initial Recognition and Measurement
The Group initially recognizes trade and other receivables on the(iii) Derecognition

date of occurrence. All other financial assets are initially recognized

Financial assets are derecognized when the contractual rights toon the transaction date when the Group became the contracting

receive cash flows expire, or when substantially all risks and rewards

party for the financial asset.

of ownership are transferred to another entity.

Trade and other receivables which do not include significant
financial components are measured at transaction price upon initial

B. Impairment of Financial Assets

recognition.

The Group recognizes an allowance for doubtful accounts for
expected credit losses on financial assets measured at amortizedNon-derivative financial assets are classified as financial assets

cost.

measured at amortized cost if both of the following conditions are
met at the time of initial recognition of financial assets. Otherwise,

Determination of Significant Increase in Credit Risk

they are classified as financial assets measured at fair value.
• The asset is held within a business model whose objective is to

At each reporting date, the Group compares the risk of financial

hold assets in order to collect contractual cash flows.

asset defaults as of the reporting date and the initial recognition• The contractual terms of the financial asset give rise ondate to assess whether the credit risk associated with the financial
asset has increased significantly since the initial recognition.

specified dates to cash flows that are solely payments ofprincipal and interest on the principal amount outstanding.

The Group assesses whether there has been a significant
increase in credit risk based on changes in the risk of default

Financial assets measured at fair value are classified as
financial assets in which changes in fair value subsequent to initialsince the initial recognition. In assessing whether there has beenrecognition are recognized in profit or loss (hereinafter referred toa change in the risk of default, the Group considers overdue

as “financial assets measured at fair value through profit or loss”)

information, as well as the following factors.

and financial assets in which changes in fair value subsequent to• Significant changes in external credit ratings of financial assets

initial recognition are recognized in other comprehensive income• Downgrade of internal credit ratings(hereinafter referred to as “financial assets measured at fair value• Deterioration in borrowers’ operating results

through other comprehensive income”).
At the time of initial recognition, debt financial instruments

Expected Credit Loss Approachthat do not satisfy amortized cost criteria are classified as financial

Expected credit losses are the present value of the difference

assets measured at fair value through profit or loss.

between the contractual cash flows to be received by the Group
under the contracts and the cash flows expected to be received.

Equity financial instruments not held-for-sale, in principle, are26

Dentsu Group Integrated Report 2024

Financial Report 2024

If the credit risk associated with a financial asset has increased

All financial liabilities are measured at fair value at initial

significantly since the initial recognition, the allowance for doubtfulrecognition. However, financial liabilities measured at amortizedaccounts related to the financial asset is measured at an amountcost are measured at cost, net of transaction costs that are directly

equal to the expected credit loss for the entire period, and if it has

attributable to the financial liabilities. In addition, put option

not increased significantly, it is measured at an amount equal to theliabilities are measured based on the present value of future

expected credit loss for the 12-month period.

redemption amount.

Notwithstanding the foregoing, for trade receivables andcontract assets that do not include significant financial components,(ii) Subsequent Measurement

the allowance for doubtful accounts is always measured at an

After initial recognition, financial liabilities are measured based

amount equal to the expected credit losses for the entire period.

on the classification as follows. However, put option liabilities are

In measuring expected credit losses, the Group uses

measured at the present value of the redemption amount, withreasonable and corroborating information available at the reportingchanges recognized as profit or loss.

date that is relevant to historical events, current conditions and(a) Financial Liabilities Measured at Amortized Cost

projections of future economic conditions. For individually

Subsequent to initial recognition, financial liabilities measured atsignificant financial assets, the Group evaluates expected credit

amortized cost are measured at amortized cost using the effective

losses individually, and for other financial assets, the Group

interest rate method.

establishes an allowance for doubtful accounts by grouping(b) Financial Liabilities Measured at Fair Value Through Profit or Lossfinancial assets with similar credit risk characteristics based on

Subsequent to initial recognition, financial liabilities measured at

location, number of days past due, security status, and external

fair value through profit or loss are remeasured at fair value at eachcredit ratings.

reporting period end and changes in fair value are recognized in

Defaults are recognized when the obligor is unable to recoverprofit or loss.

all or part of the financial assets or is determined to be extremely
difficult to recover, such as when the obligor fails to make payments(iii) Derecognition

within 90 days after the due date.

A financial liability is derecognized when the obligation is fulfilled,

In the event of default or significant financial difficulties ofdischarged, or expired.

the issuer or the obligor, the Group determines that the credit
D. Derivative Financial Instruments and Hedge Accounting

impairment is deemed to exist.
Provisions for doubtful accounts related to financial assets are

The Group utilizes derivative financial instruments, such as foreign

recognized in profit or loss. Reversal of the allowance for doubtful

exchange contracts and interest rate swap contracts, to hedge its

accounts is recognized in profit or loss.

foreign currency risks and interest rate risks, respectively.

Financial assets are written off directly when collection is not

documents the relationship to which hedge accounting is adopted,

reasonably expected, such as the debtor’s inability to execute theas well as the objectives and strategies of risk management for

repayment plan agreed with the Group.

undertaking the hedge. The documentation includes hedging

At the inception of the hedge, the Group designates andThis typically applies when the Group determines that therelationships, the risk management objective, strategies forborrower does not have an asset or revenue source that generates

undertaking the hedge and assessments of hedge effectiveness.
These hedges are expected to be highly effective in offsetting

sufficient cash flow to repay the amount directly written off. The
Group continues to enforce performance against directly written-offchanges in fair value or cash flows, however are assessed on an

financial assets so that past due receivables can be collected.

ongoing basis to determine whether hedge relationship haveactually been highly effective throughout the hedging periods.

C. Non-derivative Financial Liabilities (Including put option liabilities.

Derivative financial instruments are initially recognized at fair

Refer to “(2) Business combination” for contingent consideration.)value. In addition, derivatives are measured at fair value after initial(i) Initial Recognition and Measurement

recognition and changes in fair value are accounted for as follows:
As for hedge accounting, the Group elected to apply IAS 39 in

The Group initially recognizes debt securities on the date of issue.
Contingent consideration arising from a business combinationaccordance with the transitional measure.

and put option liabilities to acquire interests from non-controlling(i) Cash Flow Hedge

interests are recognized on the date the Group acquires control

Regarding gains or losses on hedging instruments whereof the acquired entity. All other financial liabilities are initiallyhedges are effective, changes in fair value are recognized inrecognized on the transaction date when the Group becomes theother comprehensive income, and are reclassified from othercontracting party for the financial liability.

comprehensive income to profit or loss when the cash flows fromthe hedged items affect profit or loss. If a hedged item results in the

Non-derivative financial liabilities are classified as financial
liabilities measured at fair value through profit or loss and financial

recognition of non‑financial assets or non‑financial liabilities, theliabilities measured at amortized cost at initial recognition.

amount recognized as other components of equity is treated as an
27

Dentsu Group Integrated Report 2024

adjustment to the initial carrying amount of the non-financial assets

straight-line method over their estimated useful lives.

or non‑financial liabilities through other comprehensive income.

The estimated useful lives of major property, plant andWhere hedges are ineffective, changes in fair value are

equipment items are as follows:

recognized in profit or loss.

• Buildings and structures: 0 to 100 years

Hedge accounting is discontinued when the hedging

Depreciation methods, useful lives and residual values are

instrument is expired or sold, terminated or exercised, when thereviewed at the end of each reporting period and changes arehedge no longer meets the criteria for hedge accounting, or when

made as necessary.

the hedging designation is revoked.
(8) Goodwill and Intangible Assets(ii) Hedge of Net Investment in Foreign Operations

A. Goodwill

Translation differences resulting from the hedges of net investment

Goodwill is not amortized and is measured at acquisition cost lessin foreign operations are accounted for similarly to cash

accumulated impairment losses.

flow hedges.
B. Intangible Assets

Gains or losses on the hedging instrument relating to
the effective portion of the hedge are recognized in other

Cost model is applied for subsequent measurement of intangible

comprehensive income while those for the ineffective portion are

assets, and are measured at acquisition cost less accumulated

recognized in profit or loss.

amortization and accumulated impairment losses.

Cumulative gains or losses recognized in equity as other

Intangible assets acquired separately are measured atcomprehensive income are reclassified to profit or loss uponacquisition cost for initial recognition, and the costs of intangible

disposal of foreign operations.

assets acquired in business combinations are recognized at fairvalue at the acquisition date.

(iii) Derivative Financial Instruments not Designated as Hedges

The acquisition cost for internally generated intangible assets

Changes in fair value of derivative financial instruments areis the sum of the expenditures incurred from the date when therecognized in profit or loss.

intangible asset first meets all of the capitalization criteria.

E. Offsetting of Financial Instruments

over their estimated useful lives.

Intangible assets are amortized using the straight-line method
Financial assets and financial liabilities are offset and presented

The estimated useful lives of major intangible asset items areon a net basis if, and only if, there is a currently enforceable legal

as follows:right to offset the recognized amounts, and if there is an intention to• Software: 2 to 5 years

settle on a net basis or to realize the assets and settle the• Customer relationships: Effective period (mainly 2 to 18 years)

liabilities simultaneously.

Amortization methods and useful lives of intangible assets
with finite useful lives are reviewed at the end of each reporting(5) Cash and Cash Equivalents

period and changes are made as necessary.

Cash and cash equivalents consist of cash on hand, demand
deposits, and short-term investments that are readily convertible to(9) Leases

known amounts of cash and subject to insignificant risk of change in

A. Leases as a lessee

value and due within three months from the date of acquisition.

The Group determines upon inception of the contracts whether
such contracts are leases or contain leases.
If the contracts transfer the right to control the use of the(6) Inventories
Inventories are mainly comprised of rights and contents related to

identified asset over a period of time in exchange for consideration,

sports and entertainment. Inventories are measured at the lower ofthe contracts are leases or contain leases.
Right-of-use assets and a lease obligation are recognized atcost or net realizable value. The cost of inventories is determined

the beginning of the lease. Right-of-use assets are measured at cost

mainly by the specific identification method.

the beginning of the lease. During the lease period, the cost model(7) Property, Plant and Equipment

is applied and measured at cost less accumulated depreciation andCost model is applied for subsequent measurement of property,

accumulated impairment losses.
After initial recognition, right-of-use asset is depreciated onplant and equipment, and is measured at acquisition cost lessa straight-line basis from the beginning of the lease period to theaccumulated depreciation and accumulated impairment losses.
Acquisition cost includes any costs directly attributable to theuseful life of the right-of-use asset or to the end of the lease period,
whichever occurs first.

acquisition of the asset and dismantlement, removal and restoration
costs.

Lease obligations are measured at the present value ofremaining lease payments of the beginning of the lease period.

Except for assets such as land which are not depreciated,

During the lease period, the carrying amount of the leaseproperty, plant and equipment are depreciated mainly using the28

Dentsu Group Integrated Report 2024

Financial Report 2024

obligation is adjusted to reflect the interest rate on the lease

investment accounted for using the equity method is not separately

obligation and the lease payments made. If the lease obligations

recognized, it is not tested for impairment separately. If there is any

are revised or the lease terms are changed, lease obligations isindication that an investment in equity-accounted investees may beremeasured and right-of-use assets are adjusted. For short-term

impaired, the entire carrying amount of the investment is tested asleases and leases of low-value assets, IFRS 16 Paragraph 6 isa single asset.

applied, and lease payments are recognized as expenses over thelease period using the straight-line method.

(11) Non-current Assets Classified as Held for Sale
A non-current asset or asset group whose carrying amount is

B. Sale and Leaseback Transaction

expected to be recovered principally through a sale transaction

The Group determines, based on IFRS 15, whether the transfer ofrather than through continuing use is classified as held-for-sale if

an asset from the seller-lessee to the buyer-lessor is accounted

the non-current asset or asset group is available for immediate salefor as a sale in a sale and leaseback transaction. When the transfer

in its present condition, Group management is committed to a sales

corresponds to a sale of an asset, the seller-lessee measuresplan and its sale is expected to be completed within one year.

right-of-use asset arising from the leaseback by the proportion of

The Group measures a non-current asset or asset groupthe previous carrying amount of the asset relating to the right ofclassified as held-for-sale at the lower of its carrying amount and fairuse retained by the seller-lessee, and recognizes only the gain orvalue less costs to sell.

loss of the portion that was not leased back. When the transfer does
not correspond to a sale of an asset, the seller-lessee continues to(12) Employee Benefits

recognize the transferred asset, and financial liabilities equal to the

A. Post-employment benefits

amount of the transfer proceeds are recognized, and the transfer is

The Group has set up defined benefit plans and defined

accounted for as a financial transaction.

contribution plans as employee retirement benefit plans.

(10) Impairment of Non-financial Assets

value of defined benefit obligations less the fair value of any plan

Except for inventories and deferred tax assets, the Group assesses

assets as liabilities or assets.

For defined benefit plans, the Group recognizes the present

For defined benefit plans, the Group determines the present

at the end of the reporting period whether there is any indicationthat a non-financial asset may be impaired. If such an indication

value of defined benefit obligations, related current service cost

exists, an impairment test is performed based on the recoverable

and past service cost using the projected unit credit method. The

amount of the asset.

discount rate is determined based on high quality corporate bondGoodwill is not amortized. Impairment tests for goodwill

yield rates at fiscal year end for the corresponding discount period

are performed once a year, irrespective of whether there is any

based on projec ted per iod until the expec ted benef i t

indication that they may be impaired, or in cases where there ispayment date.

an indication of impairment. Refer to Note “15. GOODWILL AND

Service costs and interest costs of defined benefit plans are

INTANGIBLE ASSETS” for details of impairment testing of goodwill.

recognized in profit or loss, and net interest is determined using

Except for assets that generally do not generate independent

the discount rate described above. Remeasurements of defined

cash flows from other assets or asset groups, the recoverable

benefit plans are recognized in other comprehensive income in theamount of an asset or a cash-generating unit is determined

period when they are incurred and reclassified to retained earnings

individually by asset at the higher of its fair value less costs ofimmediately. Past service costs are recognized in profit or loss in thedisposal or its value in use.

period incurred.

Where the carrying amount of the asset or cash-generating

The cost for defined contribution plans is recognized in profit

unit exceeds its recoverable amount, the asset is written down to its

or loss in the period in which the employees render therecoverable amount and impairment losses are recognized.

related services.

An impairment loss recognized for goodwill is not reversed ina subsequent period. For assets excluding goodwill, an assessment

B. Termination Benefits

is made at reporting period end to determine whether there is

The Group provides termination benefits if the Group terminates

any indication that previously recognized impairment losses may

the employment of an employee before the normal retirement

no longer exist or have decreased. If any such indication exists,

date along with restructuring, or if an employee of some domestic

the recoverable amount of the asset is estimated. In cases that theconsolidated subsidiaries voluntarily retires in exchange for therecoverable amount exceeds the carrying amount of the asset,

benefits. If the Group has a detailed official plan for terminating an

a reversal of impairment losses is recognized. The amount of

employee and there is no possibility for the plan to be cancelled,

the reversal of the impairment loss shall not exceed the carrying

the termination benefit is recorded as an expense as of the time ofamount that would have been determined (net of depreciation or

the commitment of the termination of employment.

amortization) if no impairment loss had been recognized.
Because goodwill that forms part of the carrying amount of an
29

Dentsu Group Integrated Report 2024

(13) Provisions

obligation is primarily satisfied over time during the contract

Provisions are recognized when the Group has a present obligation

period, and the revenue is recognized on a pro-rata basis over(legal or constructive) as a result of a past event, it is probable thatthe contract period during which the performance obligation is

the obligation will be required to be settled and a reliable estimate

satisfied. Regarding transactions other than those mentioned

can be made for the amount of the obligation.

above, the right to use the right is transferred to the client at one

Where the effect of the time value of money is material,

point of time when the right becomes available to the client, andprovisions are measured based on the present value using a

the performance obligation of the Group is satisfied. Hence, thediscount rate reflecting the risks specific to the liability.

revenue is recognized at that point in time.

Provision for restructuring is recognized when the GroupThe Group determines that it primarily acts as an agent

has a detailed official plan for the restructuring and parties

considering the primary responsibility for the performance ofconcerned who are expected to be affected are made to expect

commitments, inventory risk, pricing discretion and other factors inthat restructuring will surely be implemented through the actual

the transaction.
Transactions related to the advertising business are principally

implementation or disclosure of the plan.

recorded based on the net amount of consideration received from
(14) Revenue

customers, less related costs, or a certain amount of fee received

The Group recognizes revenue under the five-step approachas a commission, for services provided by the Group. For certain

described below.

transactions which the Group determined that it is acting as a

Step 1: Identify contracts with customers

principal, consideration received from customers and costs are

Step 2: Identify performance obligations in a contract

presented on a gross basis.

Step 3: Calculate the transaction priceIn each transaction, a judgement as to whether the Group

Step 4: Allocate the transaction price to the performanceacts as an agent or a principal and a judgement about the timing

obligations in the contractof revenue recognition have an impact on the amount of revenue.

Step 5: Recognize revenue when the entity satisfies its

Accordingly, such judgements are categorized as judgments madeperformance obligations.

in the application of accounting policies that may have a significant

The Group provides advertising, information services andimpact on the consolidated financial statements in “4. SIGNIFICANT

other businesses to its customers.

ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS”

In the advertising business, the Group mainly provides

Consideration for transactions in the advertising businessservices such as placement of advertising into various media,

is received primarily within one year of satisfying performance

production of advertising including creative services, and various

obligations and does not include significant financing components.
In the information services business, the Group is mainly

content-related services. With regards to placement of advertising
into various media, revenue is recognized when the media is

involved in sales of software products, development of systems,

placed, mainly because control of the service is transferred to theand outsourcing/operation/maintenance services.
Regarding sales of software products and products,

customer when the advertisement is placed on the media and therevenue is recognized at the point of delivery to the customer

performance obligations of the Group are satisfied.
Regarding advertisement production, the performance

because control of the product is transferred to the customer andobligation is to provide a series of management operations fromthe Group’s performance obligations are satisfied. Regarding

planning, production, filming, editing through to completion.

software development, the customer’s asset will enhance as the

The performance obligation of such management operations

development progresses, and the customer will gain control ofis considered to be satisfied evenly due to its nature, and thethe asset, and the Group’s performance obligations are satisfied

performance obligation makes progress according to the elapsed

accordingly. Therefore, revenue is recognized based on the

period of time. Hence, the revenue is recognized for a certain

progress of development. Development progress is calculated

period of time on a pro-rata basis over the contract period during

based on the ratio of inputs used to satisfy performance obligations

which the performance obligation is satisfied.

(costs incurred) to total expected inputs until such performance

Regarding provision of services such as various content

obligations are fully satisfied. As for the operation and maintenanceservices, the primary services are the rights business such asservices, performance obligations are satisfied as the contract

marketing rights of sporting events. In the rights business such as

period elapses, and revenue is recorded on a pro rata basis over themarketing rights of sporting events, the performance obligation iscontract period in which the performance obligations are satisfied.
Revenues from the information service business are calculated

to make the rights such as marketing rights available to the client.
Among such transactions, regarding those relating to complex

by deducting discounts, etc., from the consideration in sales

rights in which the client obtains multiple rights at multiple points

contracts. Considering the primary responsibility for fulfilling theof time, the rights will become available to the client for a certain

commitments, inventory risk, pricing discretion and other factors,

period of time, and the performance obligation is considered

the Group is deemed to have a strong basis as a principal, therefore

to be satisfied evenly due to its nature. Hence, the performancerevenues and costs are recorded on a gross basis. Consideration for30

Dentsu Group Integrated Report 2024

Financial Report 2024

transactions in the information services business is received mainly

realized or the liability is settled, based on tax rates that have been

within one year after fulfillment of the performance obligation andenacted or substantively enacted by the reporting period end.

does not include any significant financing components.

Deferred tax assets are recognized to the extent that it“Other Business” refers to business activities such as theis probable that taxable profits will be available against which

provision of specialized functions in corporate domains, the leasing

carryforwards of unused tax losses, tax credit carryforwards andof office space, and building maintenance services.

deductible temporary differences can be utilized. Deferred tax
assets are reassessed at the end of the fiscal year and reduced by(15) Finance Income and Finance Expenses

the amount of any tax benefits that are not expected to be realized.

Finance income mainly consists of interest and dividend income.

Deferred tax assets and liabilities are offset if the Group has aInterest income is recognized as accrued using the effective

legally enforceable right to set off current tax assets against current

interest rate method while dividend income is recognized when the

tax liabilities, and income taxes are levied by the same taxation

shareholder’s right to receive payment is established.

authority on the same taxable entity.

Finance expenses mainly consist of interest expenses onborrowings and bonds. Interest expenses are recognized as(17) Equity

incurred using the effective interest rate method.

A. Share Capital and Share Premium AccountEquity instruments issued by the Company are recorded in share(16) Income Taxes

capital and share premium account. Transaction costs directly

Income taxes consist of current income taxes and deferred income

attributable to the issuance of an equity instrument are deducted

taxes. Income taxes are recognized in profit or loss, except for taxes

from equity.

arising from items that are recognized in other comprehensive
income or direc tly in equit y and taxes arising from

B. Treasury Sharesbusiness combinations.

Treasury shares are recognized at cost and deducted from equity.

Current income taxes are measured at the amount which is

No gain or loss is recognized on the purchase, sale or cancellationof treasury shares.

expected to be paid to or refunded from the taxation authorities.

When treasury shares are sold, any difference between their

The tax rates and tax laws used to calculate the amount are thosethat are enacted or substantively enacted, by the end of thecarrying amount and consideration received is recognized in thereporting period.

share premium account.

Deferred tax assets and liabilities are recognized for temporary
differences between the carrying amount of assets and liabilities in

C. Put options written over non-controlling interests

the Consolidated Statement of Financial Position and their tax basis

Non-controlling interests are recognized when the Group writes aamount. For specified transactions where equal amounts of assets

put option over equity shares held by non-controlling shareholders

and liabilities are recognized from a single transaction, deferredof a subsidiary, and are not included in the calculation of goodwill.

tax liabilities and deferred tax assets are initially recognized, for

In addition, the written put option is initially recognized at the

taxable temporary differences related to the recognized assets

present value of the redemption amount as other financial liabilities,

and deductible temporary differences related to the recognized

and the same amount is deducted from retained earnings.

liabilities, respectively. Deferred tax liabilities are not recognized
for taxable temporary differences arising from the initial recognition(18) Earnings per Shareof goodwill.

Basic earnings per share are calculated by dividing profit for theDeferred tax liabilities are recognized for taxable temporary

year attributable to ordinary shareholders of the parent company

differences associated with investments in subsidiaries, associates

by the weighted-average number of ordinary shares outstanding

and joint ventures. However, deferred tax liabilities are notduring the year, adjusted by the number of treasury shares. Diluted

recognized for taxable temporary differences associated withearnings per share are calculated by adjusting the effects of all

investments in subsidiaries, associates and joint ventures topotential ordinary shares with dilutive effect.

the extent the Group controls the timing of the reversal of thetemporary difference and it is probable the temporary difference(19) Share-based Payments

will not reverse in the foreseeable future. Deferred tax assets are

The Company and certain subsidiaries grant equity-settled andrecognized for deductible temporary differences associated withcash-settled share-based payment plans.
For equity-settled share-based payments, services received

investments in subsidiaries, associates and joint ventures only to theextent that it is probable that the temporary difference will reverse

and the corresponding increase in equity are measured at thein the foreseeable future and there will be sufficient taxable profits

fair value of the equity instruments at the date of grant and areagainst which the temporary differences can be utilized.

recorded as an expense over the vesting period and recognized as

Deferred tax assets and liabilities are measured at the tax rates

an increase in equity.

that are expected to apply to the reporting period when the asset is

For cash-settled share-based payments, services received and31

Dentsu Group Integrated Report 2024

the liability incurred are measured at the fair value of the liability.

management to make judgments, estimates and assumptions

The Group recognizes expense and liability, as the employeesthat affect the adoption of accounting policies and the reported

render services during the vesting period. The fair value of theamounts of revenues, expenses, assets and liabilities. Theseliability is remeasured at the end of each reporting period and at

estimates and assumptions are based on the best judgment of

the date of settlement, with any changes in fair value recognized inmanagement in light of historical experience and various factors

profit or loss.

deemed to be reasonable as of the fiscal year end date. However,given their nature, actual results may differ from those estimatesand assumptions.

(20) Underlying Operating Profit

The estimate and underlying assumptions are continuously

The underlying operating profit is calculated by eliminating
M&A related items and one-off items from operating profit, andreviewed. The effects of a change in estimate are recognized in theis used by management for the purpose of measuring constantperiod of the change and future periods.
Information relating to judgments carried out in the process ofbusiness performance.
M&A related items: amortization of intangible assets

the application of accounting policies that have a material impact

incurred in acquisitions, acquisition costs, share-basedon the consolidated financial statements, is mainly as follows:compensation expense issued following the acquisition of 100%
ownership of a subsidiary• Scope of subsidiaries, associates and joint ventures (“3.

One-off items: items such as restructuring cost, impairment

MATERIAL ACCOUNTING POLICIES (1) Basis of Consolidation”)• Judgements about the timing of revenue recognition, andloss and gain/loss on sale of non-current assets
The underlying operating profit is not defined under IFRS;

judgements as to whether the Group acts as a principal or an

however, it is voluntarily disclosed in the Consolidated Statement

agent in revenue recognition (“3. MATERIAL ACCOUNTINGPOLICIES (14) Revenue”)

of Income and Note “6. SEGMENT INFORMATION” since• Allocation of goodwill to cash-generating unit groups (“15.

management has concluded that the information is useful forusers of the financial statements.

GOODWILL AND INTANGIBLE ASSETS”)

As a result of the conclusion of an agreement to sell the Russia• Sale and leaseback transaction: determination on whether thebusiness in November 2022, operating profit (loss) related totransfer of an asset from the seller-lessee to the buyer-lessor is

the Russia business arising until the completion of the sale is nota sale or not (“3. MATERIAL ACCOUNTING POLICIES (9) Leases

included in the underlying operating profit for the fiscal year ended

B. Sale and Leaseback Transaction”)

December 31, 2023 as a one-off item. Accordingly, for the fiscal year
Estimates and assumptions that may have a material effect on

ended December 31, 2022, operating profit (loss) related to theRussia business, which was previously included in the underlying

the amounts recognized in the consolidated financial statements

operating profit for the fiscal year ended December 31, 2022, has

are as follows:

been eliminated and reclassified.
• Impairment of property, plant and equipment, goodwill andintangible assets (“14. PROPERTY, PLANT AND EQUIPMENT,”(21) Changes in Accounting Policies“15. GOODWILL AND INTANGIBLE ASSETS,”)The Group has applied the amendments to IAS 12 “Income Taxes,”
issued in May 2023, from the fiscal year ended December 31, 2023.

• Right-of-use assets (“16. LEASES”)

The said amendments clarify that IAS 12 shall apply to income taxes• Valuation of financial instruments (including contingent

arising from enacted or substantively enacted tax law to introduce

consideration and put option liabilities) (“35. FINANCIAL

the OECD’s BEPS Pillar Two GloBE Rules (global minimum tax rules)

INSTRUMENTS”)• Valuation of defined benefit obligations (“22.

and provide a temporary, mandatory exception from recognizing

POST-EMPLOYMENT BENEFITS”)

and disclosing deferred tax assets and liabilities related to income
taxes resulting from the introduction of the global minimum rules.

• Provisions (“21. PROVISIONS”)

In addition, as it is provided that the said amendments shall be• Recoverability of deferred tax assets (“18. INCOME TAXES”)

applied immediately and retrospectively upon issuance, the Group
has applied the said exception retrospectively from the fiscal
year ended December 31, 2023. Therefore, the Group does notrecognize and disclose deferred tax assets and liabilities related
to income taxes resulting from the introduction of the global
minimum rules.
4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of the consolidated financial statements requires
32

Dentsu Group Integrated Report 2024

Financial Report 2024

5. NEW ACCOUNTING STANDARDS NOT YET ADOPTED BY THE GROUP
New accounting standards, amended standards and new interpretations that have been issued by the date of approval of the consolidated
financial statements, but have not been subject to early adoption by the Group are as follows:
The impact of applying the new IFRS standards on the Group is currently being assessed and cannot be estimated at this time.

Name of standards

Mandatory adoption(From the year
beginning)

To be adopted by theGroup

Description of new standards and amendments

IAS 1

Presentation of Financial Statements

January 1, 2024

Fiscal year ending
December 31, 2024

The amendment clarifies how to classify debt
and other liabilities as current or non-current.

IFRS 16

LeasesJanuary 1, 2024

Fiscal year ending
December 31, 2024

The amendment adds a requirement to explain
how to account for a sale and leaseback
transaction after the transaction.

IAS 1

Presentation of Financial Statements

January 1, 2024

Fiscal year ending
December 31, 2024

The amendment requires improvements of theinformation disclosed by companies regarding
non-current liabilities with covenants.

IAS 7
IFRS 7

Statement of Cash Flows
Financial Instruments Disclosure

January 1, 2024

Fiscal year ending
December 31, 2024

The amendment introduces disclosure objectives
regarding the information about supplier financearrangements to enhance the transparency.

Fiscal year ending
December 31, 2024

The amendment specifies the assessment whena currency is considered exchangeable into theother currency and when it is not, specifies how
to determine the exchange rate to be applied. In
addition, the amendment requires the disclosureof additional information clarifying the approachto determine the exchange rate.

Standards

IAS 21The Effects of Changes in Foreign
Exchange Rate

January 1, 2024

33

Dentsu Group Integrated Report 2024

6. SEGMENT INFORMATION(1) Description of reportable segments
The Group’s reportable segments are those for which discrete financial information is available and the Board of Directors conducts regularreviews to make decisions about resources to be allocated and assess their performance.
The Group is mainly engaged in providing communication-related services focusing on advertising, and manages its “Japan”, “Americas”,“EMEA” and “APAC” business separately.
Accordingly, the Group has four reportable segments: “Japan”, “Americas”, “EMEA” and “APAC.”(2) Information on reportable segments
Accounting methods for reportable segments are identical to those described in “3. MATERIAL ACCOUNTING POLICIES.”
Segment profit is based on operating profit, net of adjusting items such as M&A related items and one-off-items.
Intersegment revenues are based on the prevailing market price.
FY2022: Year ended December 31, 2022
(Millions of Yen)
Total

Eliminations/ Consolidated
Central¥258,797¥115,523 ¥1,230,985¥15,415 ¥1,246,401

232,774

112,330

1,103,520

15,9991,119,519

68,172

51,94722,265

248,050(43,743)

204,307

–

–

–

–

–

–

(28,721)

Selling, general and administrative expenses (Note 9)

–

–

–

–

–

–

(3,701)

Restructuring cost (Note 6)

–

–

–

–

–

–

(33,941)

Gain on sale and retirement of non-current assets(Note 7)

–

–

–

–

–

–

16,826

Impairment loss (Note 8)

–

–

–

–

–

–

(35,972)

Other income

–

–

–

–

–

–

584

Other expenses

–

–

–

–

–

–

(1,763)Japan

Americas

EMEA

Revenue (Note 1,3)

¥532,651¥324,013

Net revenue (Note 2,3)

441,258

317,156

Segment profit (underlying operating profit) (Note 4)

105,665

Amortization of intangible assets incurred inacquisitions

APAC(Adjusting items)

Operating income

–

–

–

–

–

–

117,617

Share of profit of investments accounted for using theequity method

–

–

–

–

–

–

3,418

Impairment loss of investments accounted for using theequity method

–

–

–

–

–

–

(5,950)Gain on sale of investments in associates

–

–

–

–

–

–

600

Revaluation gain on step acquisition

–

–

–

–

–

–

5,467

Finance income

–

–

–

–

–

–

19,701

Finance expenses

–

–

–

–

–

–

(39,947)

Profit before tax
Segment assets (Note 5)

–

–

–

–

–

–

100,908

1,231,654

1,253,556

799,239

417,074

3,701,524

39,902

3,741,427

23,831

6,502

6,788

5,040

42,162

3,286

45,448(Other items)
Depreciation and amortization (excluding
amortization of intangible assets incurred inacquisitions)
Investments accounted for using the equity method

47,302––

167

47,46945

47,515

Capital expenditures

11,386

1,405

2,201

2,209

17,202

1,324

18,526

Increase in right-of-use assets¥8,283¥48,911¥702¥1,601¥59,499¥69¥59,569

34

Dentsu Group Integrated Report 2024

Financial Report 2024

FY2023: Year ended December 31, 2023
(Millions of Yen)
APAC

Total

Eliminations/
CentralJapan

Americas

EMEA

Consolidated

Revenue (Note 1,3)

¥548,802¥350,583¥266,377¥116,129 ¥1,281,893

Net revenue (Note 2,3)

448,998

322,078

237,523

113,235

1,121,835

22,983

1,144,819

Segment profit (underlying operating profit) (Note 4)

103,440

73,03024,238

7,957

208,666(45,151)

163,515

Amortization of intangible assets incurred inacquisitions

–

–

–

–

–

–

(30,691)

Selling, general and administrative expenses(Note 9)

–

–

–

–

–

–

(5,780)Restructuring cost (Note 6)

–

–

–

–

–

–

(9,992)Gain on sale and retirement of non-current assets(Note 7)

–

–

–

–

–

–

100
(72,201)¥22,658 ¥1,304,552(Adjusting items)

Impairment loss (Note 8)

–

–

–

–

–

–

Other income

–

–

–

–

–

–

1,622

Other expenses

–

–

–

–

–

–

(1,259)Operating income

–

–

–

–

–

–

45,312

Share of profit of investments accounted for using
the equity method

–

–

–

–

–

–

3,654

(Loss) gain on sale of investments in associates

–

–

–

–

–

–

(194)

Revaluation gain on step acquisition

–

–

–

–

–

–

142

Finance income

–

–

–

–

–

–

22,199Finance expenses

–

–

–

–

–

–

(38,009)

Profit before tax

–

–

–

–

–

–

33,103

1,193,325

1,340,332

846,794

373,0223,753,474(119,072)

3,634,401

Depreciation and amortization (excluding
amortization of intangible assets incurred inacquisitions)

29,394

2,902

7,120

5,694

45,111

2,916

48,028Investments accounted for using the equity
method50,922––

254

51,17749

51,227

Capital expenditures

19,245

1,635

3,258

3,275

27,414

1,478

28,892

Increase in right-of-use assets¥9,233¥2,285¥2,450¥5,645¥19,222–¥19,615

Segment assets (Note 5)(Other items)

35

Dentsu Group Integrated Report 2024

FY2023: Year ended December 31, 2023
(Millions of U.S. Dollars)Eliminations/ Consolidated
CentralJapan

Americas

EMEA

APAC

Total

Revenue (Note 1,3)

$3,897$2,489$1,891$825$9,102$161$9,263

Net revenue (Note 2,3)

3,188

2,287

1,686

804

7,965

163

8,129

734

519

172

56

1,482

(321)

1,161

Amortization of intangible assets incurred inacquisitions

–

–

–

–

–

–

(218)

Selling, general and administrative expenses (Note 9)

–

–

–

–

–

–

(41)

Restructuring cost (Note 6)

–

–

–

–

–

–

(71)

Gain on sale and retirement of non-current assets(Note 7)

–

–

–

–

–

–

1

Impairment loss (Note 8)

–

–

–

–

–

–

(513)

Other income

–

–

–

–

–

–

12

Other expenses

–

–

–

–

–

–

(9)

Operating income

–

–

–

–

–

–

322

Share of profit of investments accounted for using theequity method

–

–

–

–

–

–

26
(1)

Segment profit (underlying operating profit) (Note 4)(Adjusting items)(Loss) gain on sale of investments in associates

–

–

–

–

–

–

Revaluation gain on step acquisition

–

–

–

–

–

–

1

Finance income

–

–

–

–

–

–

158
(270)

Finance expenses

–

–

–

–

–

–

Profit before tax

–

–

–

–

–

–

235

8,473

9,517

6,012

2,649

26,651(845)

25,805

209

21

51

40

320

21

341

Segment assets (Note 5)(Other items)
Depreciation and amortization (excluding
amortization of intangible assets incurred inacquisitions)
Investments accounted for using the equity method

362

–

–

2

363

0

364

Capital expenditures

137

12

23

23

195

10

205

Increase in right-of-use assets

$66

$16

$17

$40

$136

–

$139

(Note 1) Eliminations/Central for revenue are due to eliminations of revenue associated with the Russia business and central functions, and intersegment transactions.
In the fiscal year ended December 31, 2022, revenue from the Russia business was ¥7,805 million and revenue from central functions was ¥8,808 million.
In the fiscal year ended December 31, 2023, revenue from the Russia business was ¥15,249 million ($108 million) and revenue from central functions was¥8,324 million ($59 million).
(Note 2) Eliminations/Central for net revenue are due to eliminations of net revenue associated with the Russia business and central functions, and intersegment
transactions. In the fiscal year ended December 31, 2022, net revenue from the Russia business was ¥7,805 million and net revenue from central functions
was ¥8,808 million. In the fiscal year ended December 31, 2023, net revenue from the Russia business was ¥15,249 million ($108 million) and net revenue
from central functions was ¥8,324 million ($59 million).
(Note 3) In the Japan segment, profit distribution from the content business, which had been presented under “Other income,” has been included in “Revenue” forthe fiscal year ended December 31, 2023. Moreover, amortization of long-term prepaid expenses, etc., which had been presented under “Other expenses”
as expenses related to the said profit distribution, has been included in “Revenue” as a deduction item of revenue. As a result, “Revenue” and “Net revenue”
for the fiscal year ended December 31, 2022 have been retrospectively adjusted to reflect the change in the presentation.
(Note 4) Eliminations/Central for segment profit (underlying operating profit) are primarily expenses associated with central functions. Furthermore, for the fiscal year
ended December 31, 2022, operating profit (loss) related to the Russia business, which had been included in segment profit (underlying operating profit) in
the fiscal year ended December 31, 2022, has been eliminated and reclassified.
(Note 5) Eliminations/central for segment assets are due to elimination of central assets and of intersegment transactions.
(Note 6) Restructuring cost by each segment was ¥6,870 million (Japan), ¥20,285 million (Americas), ¥3,144 million (EMEA), ¥3,063 million (APAC) and ¥576 million(Eliminations/Central ) for the year ended December 31, 2022, and ¥1,806 million ($13 million) (Japan), ¥ 2,852 million ($20 million) (Americas), ¥1,634
million ($12 million) (EMEA), ¥1,501 million ($11 million) (APAC) and ¥2,197 million ($16 million) (Eliminations/Central) for the year ended December 31,
2023. Impairment loss of ¥922 million (Japan), ¥6,443 million (Americas), ¥670 million (EMEA) and ¥281 million (APAC) were included in the restructuringcost, while there were no impairment loss by “Eliminations/Central” for the year ended December 31, 2022. Impairment loss of ¥1,707 million ($12 million)(Americas), ¥315 million ($2 million) (EMEA) and ¥1,039 million (Eliminations / central ) ($7 million) were included in the restructuring cost, while there were
no impairment loss by “Japan” and “APAC” for the year ended December 31, 2023
(Note 7) The gain on sale and retirement of non-current assets for the year ended December 31, 2022 and 2023 were attributable to Japan.
(Note 8) Impairment loss by each segment for the fiscal year ended December 31, 2022 was ¥1,155 million (Japan), ¥ 2,177 million (Americas), ¥4 million (EMEA),¥9,262 million (APAC) and ¥23,372 million (Eliminations / central) due to the Russia business. Impairment loss by each segment for the fiscal year ended
December 31, 2023 was ¥2,189 million ($16 million) (Japan), ¥2,114 million ($15 million) (Americas) ¥92 million ($1 million) (EMEA) and ¥67,804 million($481 million)(APAC). There was no impairment loss by “Eliminations/Central.”

36

Dentsu Group Integrated Report 2024

Financial Report 2024

(Note 9) The breakdown of selling, general and administrative expenses is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Extra retirement payments¥4¥2,618$19

M&A related cost

980

2,644

19

Share-based payment expenses (Note 1)

64

569

4

2,651

(51)

0

¥3,701¥5,780$41

Selling, general and administrative expenses

Other
Total

(Note 1) Share-based payment expenses included in ”Selling, general and administrative expenses” were incurred from a stock compensation plan using theCompany’s shares that was developed when Merkle Group Inc. (hereinafter referred to as ”Merkle”) became a wholly owned subsidiary.

(3) Matters pertaining to changes, etc., in reportable segments
On January 1, 2023, the Group formed the Group Management Team, one management team to promote global management as part of efforts
to accelerate business transformation and further enhance management sophistication so as to achieve business growth and the sustainableenhancement of corporate value. The team directly governs the four business regions worldwide.
As a result, effective from the fiscal year ended December 31, 2023, the unit of reporting segment has changed from two segments
comprising the “Japan business” and “International business” to four segments “Japan,” “Americas,” “EMEA,” and “APAC.”
Further, gain/loss and assets related to the Russia business and central functions attributable to the international business, which were
included in “International business” in the fiscal year ended December 31, 2022, were changed to “Eliminations/Central” from the fiscal year
ended December 31, 2023.
The presented segment information for the fiscal year ended December 31, 2022 is based on the aforementioned post-change
segmentation unit. Accordingly, in the fiscal year ended December 31, 2022, revenue was ¥16,614 million higher, net revenue was ¥16,611 million
higher, segment profit (underlying operating profit) was ¥34,932 million lower, segment assets were ¥18,895 million lower, depreciation andamortization (excluding amortization of intangible assets incurred in acquisitions) were ¥3,286 million higher, investments accounted for using
the equity method were ¥45 million higher, capital expenditures were ¥1,324 million higher, and the increase in right-of-use assets was ¥69
million higher, respectively, than if calculated before the change, all under “Eliminations/Central.” Further, in the fiscal year ended December 31,
2023, revenue increased by ¥23,573 million ($167 million), net revenue increased by ¥23,573 million ($167 million), segment profit (underlying
operating profit) decreased by ¥34,448 million ($245 million), segment assets decreased by ¥42,087 million ($299 million), depreciation
and amortization (excluding amortization of intangible assets incurred in acquisitions) increased by ¥2,916 million ($21 million), investments
accounted for using the equity method increased by ¥49 million ($0 million), and capital expenditures increased by ¥1,478 million ($10 million),
all under “Eliminations/Central.” There was no respective increase in right-of-use assets.
(4) Information about products and services
With regard to advertising services, the Group provides various advertising through media including newspapers, magazines, radio, television,internet, sales promotion, movies, out-of-home, public transportation, and others. The Group also provides clients with event marketing,creative services, marketing, public relations, contents services, and other services.
With regard to information services, the Group provides information services, sales of information-related products and other services.
The group also provides services such as the provision of specialized functions in corporate domains, the leasing of office space, andbuilding maintenance.
Revenues from external customers for each product and service are as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Advertising services¥1,138,203¥1,182,233$8,394

Information services

106,884

121,577

863

1,312

741

5

¥1,246,401¥1,304,552$9,263

Other services
Total

37

Dentsu Group Integrated Report 2024

5) Regional information
A. Revenue from external customers
Revenue attributable to the United States among revenue from international is ¥294,930 million for the year ended December 31, 2022 and¥308,629 million ($2,191 million) for the year ended December 31, 2023. In general, the amount is based on the customer’s location.
B. Non-current assets (property, plant and equipment, goodwill, intangible assets, right-of-use assets and investment property)
FY2022(Year ended
December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)$1,257

Japan¥171,106¥177,058

International (mainly the United Kingdom and the United States)

959,925

1,061,455

7,537¥1,131,031¥1,238,513$8,794

Total(Note 1) Non-current assets are allocated according to the location of each group entity.
(Note 2) Within the international, goodwill and intangible assets not tied to a specific country amounted to ¥726,467 million and ¥143,945 million, respectively, as ofDecember 31, 2022, and ¥807,901 million ($5,736 million) and ¥157,475 million ($1,118 million), respectively, as of December 31, 2023.

(6) Information about major customers
Information about major customers is omitted as the Group does not have a single external customer that contributes 10% or more to the Grouprevenue in the Consolidated Statement of Income.
7. BUSINESS COMBINATIONSFY2022: Year ended December 31, 2022
Acquisition of Septeni Holdings Co., Ltd.
(1) Details of business combination
A. Name of the acquiree		

Septeni Holdings Co., Ltd., (hereinafter, “Septeni HD”)

B. Description of acquired business		

Digital marketing business, media platform business

C. Main reason for business combination
On October 28, 2018, the Group announced that Septeni HD would become an equity-accounted investee through a capital and businessalliance. In the subsequent period, through deep alliances and collaborations, the Septeni Group and companies within dentsu Japan, suchas Dentsu Digital Inc. (hereinafter “Dentsu Digital”) and Dentsu Inc., which are two of the core companies within the Dentsu Group’s businessin Japan, have produced consistent results through their business alliance, including in terms of development of services and acquisition of
new customers. Now, by welcoming the Septeni Group into the Dentsu Group, both groups are able to further expand synergy, leading to anincreased presence in the digital marketing sector and accelerating the evolution of dentsu Japan into an Integrated Growth Partner (IGP) that iscommitted to the sustainable growth of client companies and society.
D. Date of the business combination
		

January 4, 2022

E. Ratio of acquired equity interest with voting rights		

Ratio of voting rights held prior to the business combination

20.98%

		

Ratio of voting rights additionally acquired on the date of the business combination

31.03%

		

Ratio of voting rights following acquisition

52.01%

F. Legal form of the business combination
The legal form is as follows: a share exchange whereby Dentsu Direct Inc. (hereinafter, “Dentsu Direct”), a consolidated subsidiary of theGroup, becomes a wholly-owned subsidiary of Septeni HD (share exchange of 3,900 shares of Dentsu Direct common stock and 12,768,600
shares of Septeni HD common stock); a subscription for new shares issued by Septeni HD through third-party allocation (total 70,118,794 sharesof Septeni HD common stock, amount paid per share: ¥465, total amount paid: ¥32,605 million; and the transfer of a portion of shares of Dentsu
Digital common stock to Septeni HD (3,675 shares of Dentsu Digital common stock, voting rights of Dentsu Digital shares: 25.0%, total amountreceived as consideration for the transfer: ¥31,250 million).
(2) The period of performance of the acquired business included in the Consolidated Statement of Income
Results from January 4, 2022 to December 31, 2022 are included.

38

Dentsu Group Integrated Report 2024

Financial Report 2024

(3) Breakdown of acquired businesses by acquisition cost and type of consideration(Millions of Yen)

Fair value of the equity interest in Septeni HD immediately prior to
the acquisition date (Note 1)¥13,097

Fair value of the common stock of Dentsu Direct and Dentsu Digital(Note 2)18,016
1,355

Cash and cash equivalents (Note 3)¥32,469

Total acquisition cost

(Note 1) As a result of remeasuring the equity interest in Septeni HD held immediately prior to the acquisition date, “revaluation gain on step acquisition” of ¥5,388
million was recognized.
(Note 2) Calculated based on the fair value of the equity interest in Septeni HD that was additionally acquired.
(Note 3) Net expenditure of the difference between the amount paid of ¥32,605 million for the subscription to the new share issuance by Septeni HD throughthird-party allocation and the amount received of ¥31,250 million due to the transfer of a portion of shares of Dentsu Digital common stock to Septeni HD.

(4) Amount and presentation of acquisition-related expenses
The acquisition-related expenses pertaining to said business combination were ¥143 million and included under “Selling, general andadministrative expenses” in the Consolidated Statement of Income.
(5) Fair value of assets and liabilities on the date of business combination, consideration paid and goodwill(Millions of Yen)

Current assets (Note 1)¥34,829

Non-current assets

36,363

Total assets

71,193Current liabilities

20,585

Non-current liabilities

11,72732,312

Total liabilities
Fair value of identifiable net assets

38,880Total consideration

32,469Non-controlling interest (Note 2)

18,668Goodwill (Note 2)¥12,258(Note 1) The fair value of acquired trade and other receivables is ¥16,856 million, the amount receivable under contracts is ¥16,879 million, and the amount that is notexpected to be recovered is ¥23 million.
(Note 2) Non-controlling interests are measured by multiplying the fair value of the identifiable net assets of the acquiree as of the date when control was gained by
the equity interest after the business combination, after deducting the portion separately attributable to non-controlling shareholders.
(Note 3) Goodwill reflects expected future excess earning power. No amount is deductible for tax purposes.

(6) Allocated amount, breakdown, and the amortization period of intangible assets other than goodwill(Millions of Yen)
Asset classes

AmountCustomer relationships¥28,153

Amortization period(year)13(7) Impact of business combination on cash flows(Millions of Yen)

Payment of acquisition costs in cash and cash equivalents¥(1,355)

Cash and cash equivalents accepted on the date of the business combination

18,744

Proceeds from share acquisition¥17,389

39

Dentsu Group Integrated Report 2024

(8) Revenue and profit of the acquired business
The post-acquisition revenue and profit for the year of Septeni HD, the acquiree, included in the Consolidated Statement of Income were
¥23,806 million and ¥3,039 million, respectively.
Other business combinations
The Group acquired the following companies in the fiscal year ended December 31, 2022.
Name of acquiree

Place of incorporation

Pexlify Limited

Ireland

Extentia Information Technology

India

Aware Services Pty Ltd.

Australia

IGNITION POINT Inc.

Japan

Dentsu Digital Anchor Inc.(formerly Dig into Inc.)Japan

The Group conducted business combinations for the purposes of strengthening its operations, expanding its market share primarily in the
fast-growing areas, and increasing its capacity in the fields of media and digital businesses.
During the year ended December 31, 2022, the Group acquired shares of multiple companies, but none of such acquisitions, expect for the
Septeni HD one, have a significant impact on the consolidated financial statements. Individual descriptions of the following amounts have been
therefore omitted.
The acquisition cost of the acquired businesses was ¥31,868 million. The acquisition cost consists of cash of ¥27,913 million, shares of ¥85
million and contingent consideration of ¥3,870 million.
Shares of ¥85 million were measured at the acquisition-date fair value of equity ownership in Dentsu Digital Anchor Inc.
Revaluation gain on step acquisition of ¥79 million was recognized in the Consolidated Statement of Income. This is because the Groupremeasured the previously held equity interest in Dentsu Digital Anchor Inc. at the acquisition-date fair value.
Contingent consideration is calculated according to the operating results of acquired companies. For details of contingent consideration,please see “20. BONDS, BORROWINGS, AND OTHER FINANCIAL LIABILITIES.” The acquisition-related expenses were ¥955 million.
The fair value of assets and liabilities, consideration paid, non-controlling interests and goodwill as of the business combination dates are
as follows.
(Millions of Yen)

¥17,831

Total assets
Total liabilities

6,226

Fair value of identifiable net assets

11,605

Total consideration

31,8682,420

Non-controlling interests (Note 1)¥22,683

Goodwill (Note 2)(Note 1) Non-controlling interests were measured by multiplying the shareholding ratio after the business combination by the fair values of identifiable net assets of
the acquiree at the date of acquisition of control, excluding the portion individually attributable to non-controlling shareholders.
(Note 2) Goodwill reflects the expected future excess earning power. The total amount of goodwill that is expected to be deductible for tax purposes is¥15,841 million.

The amount allocated to intangible assets (customer-related) separately from goodwill is ¥10,810 million.
The post-acquisition revenue and loss for the year of the acquirees, included in the Consolidated Statement of Income were ¥8,784 million and¥58 million, respectively.
(Pro forma information)
Assuming that the business combinations were executed at the beginning of the year ended December 31, 2022, revenue and profit for the yearof the Consolidated Statement of Income for the year ended December 31, 2022 would be ¥1,251,717 million and ¥66,371 million, respectively.
This pro forma information is unaudited. Furthermore, such information does not necessarily indicate possible future events, nor reflect theoperating results of the Group should the actual equity investment had occurred as of the beginning of the year ended December 31, 2022.

40

Dentsu Group Integrated Report 2024

Financial Report 2024

FY2023: Year ended December 31, 2023
Acquisition of Tag Worldwide Holdings Ltd.
(1) Details of business combination
A. Name of the acquiree		

Tag Worldwide Holdings Ltd. (hereinafter, “Tag”) (Business unit brand in “AI wortheimer Holdings Limited”)

B. Description of acquired business		

Digital creative content production business, technology business, and channel activation business

C. Main reason for business combination
The Group has redefined its business domain, in which marketing, technology, and consulting are increasingly integrated, as “People-centered
Transformation.” It continues to evolve into a company that creates new solutions and social impacts through the power of superb creativity
and technology. The acquisition will allow the Group to pursue the customer experience management (CXM) domain, which is at the core of
its “People-centered Transformation,” and contribute to its integrated business operation combining the media and creative fields throughpersonalization of marketing.
D. Date of the business combination		June 30, 2023

E. Ratio of acquired equity interest with voting rights

100.0%

F. Legal form of the business combination		

Acquisition of shares in exchange for cash(2) The period of performance of the acquired business included in the Consolidated Statement of Income
Results from July 1, 2023 to December 31, 2023 are included.
(3) Breakdown of acquired businesses by acquisition cost and type of consideration
Acquisition cost of the acquired business: ¥89,003 million ( $632 million )Breakdown of acquisition costs
Consideration ( cash ) for shares: ¥89,003 million ( $632 million )(4) Amount and presentation of acquisition-related expenses
The acquisition-related expenses pertaining to said business combination were ¥1,819 million ($13 million) and included under “Selling, generaland administrative expenses” in the Consolidated Statement of Income.
(5) Fair value of assets and liabilities on the date of business combination, consideration paid and goodwill(Millions of Yen)

(Millions of U.S. Dollars)

Current assets (Note 1)¥26,866$191

Non-current assets

27,731

197

Total assets

54,597388

Current liabilities

26,761190

Non-current liabilities
Total liabilities

7,976

57

34,737247

Fair value of identifiable net assets

19,859141

Total consideration

89,003632

Non-controlling interests
Goodwill (Note 2)––¥69,144$491(Note 1) Cash and cash equivalents ¥3,041 million ($22 million) are included. The fair value of acquired trade and other receivables is ¥22,077 million ($157 million),
the amount receivable under contracts is ¥22,376 million ($159 million), and the amount that is not expected to be recovered is ¥299 million ($2 million).
(Note 2) Goodwill reflects the future synergies and excess earning power expected from the business acquisition. The amount expected to be deductible for tax
purpose is ¥44,281 million. ($314 million)

Some of the above amounts are provisional fair values calculated based on the reasonable information available at this point because theacquisition date was June 30, 2023 and the allocation of acquisition costs had not been completed by the end of the fiscal year ended December
31, 2023.

41

Dentsu Group Integrated Report 2024

(6) Allocated amount, breakdown, and the amortization period of intangible assets other than goodwill(Millions of Yen)
Asset classes

AmountAmortization period (year)(Millions of U.S. Dollars)
AmountCustomer relationships¥16,152

10

$115

Other

¥7,6595~10$54(Millions of Yen)

(Millions of U.S. Dollars)¥(90,531)$(643)(7) Impact of business combination on cash flows
Payment of acquisition costs in cash and cash equivalents
Cash and cash equivalents accepted on the date of the business combination
Payments for share acquisition

3,041

22

¥(87,490)$(621)(8) Revenue and profit of the acquired business
The post-acquisition revenue and loss for the year of Tag, the acquiree, included in the Consolidated Statement of Income were ¥19,783 million($140 million) and ¥172 million ($1 million), respectively.
Other business combinations
The Group acquired the following companies in the fiscal year ended December 31, 2023.
Name of acquiree

Place of incorporation

Omega Customer Relationship Management Consulting, S.L.

Spain

Shift7 Digital, LLC.

USA

RCKT GmbHGermany

Dentsu I&C Partners Inc.

Japan

The Group conducted business combinations for the purposes of strengthening its operations, expanding its market share primarily in the
fast-growing areas, and increasing its capacity in the fields of media and digital businesses.
During the year ended December 31, 2023, the Group acquired shares of multiple companies, but none of such acquisitions, havean individually significant impact on the consolidated financial statements. Individual descriptions of the following amounts have been
therefore omitted.
The acquisition cost of the acquired businesses is ¥24,803 million ($176 million). The acquisition cost consists of cash of ¥13,692 million ($97
million), shares of ¥198 million ($1million) and contingent consideration of ¥10,912 million ($77 million).
Revaluation gain on step acquisition of ¥142 million ($1 million) was recognized in the Consolidated Statement of Income. This is because
the Group remeasured the previously held equity interest in Dentsu I&C Partners at the acquisition-date fair value.
Contingent consideration is calculated according to the operating results of acquired companies. For details of contingent consideration,please see “20. BONDS, BORROWINGS, AND OTHER FINANCIAL LIABILITIES.” The acquisition-related expenses were ¥2,644 million($19 million).
The fair value of assets and liabilities, consideration paid, non-controlling interests and goodwill as of the business combination dates are
as follows.
(Millions of Yen)

(Millions of U.S. Dollars)

Total assets¥13,983$99

Total liabilities

5,662

40

Fair value of identifiable net assets

8,320

59

Total consideration

24,803176

Non-controlling interests (Note 1)
Goodwill (Note 2)244

2¥16,727$119(Note 1) Non-controlling interests were measured by multiplying the shareholding ratio after the business combination by the fair values of identifiable net assets of
the acquiree at the date of acquisition of control, excluding the portion individually attributable to non-controlling shareholders.
(Note 2) Goodwill reflects the expected future excess earning power. The total amount of goodwill that is expected to be deductible for tax purposes is ¥4,387 million($31 million).

42

Dentsu Group Integrated Report 2024

Financial Report 2024

The amounts presented above are fair values based on the best estimate at this time. They are therefore subject to revisions for a year from thedate on which the Group obtained control of said companies, if additional information is obtained and evaluated about facts and circumstancesthat existed as of the date on which the Group obtained control. The amount allocated to intangible assets excluding goodwill (customer
relationship) is ¥9,613 million ($68 million).
The post-acquisition revenue and loss for the year of the acquirees, included in the Consolidated Statement of Income were ¥7,811 million ($55
million) and ¥1,402 million ($10 million), respectively.
(Pro forma information)
Assuming that the business combinations were executed at the beginning of the year ended December 31, 2023, revenue and loss for the yearof the Consolidated Statement of Income for the year ended December 31, 2023 would be ¥1,323,800 million ($9,399 million) and ¥5,752 million($41 million), respectively.
This pro forma information is unaudited. Furthermore, such information does not necessarily indicate possible future events, nor reflect theoperating results of the Group should the actual equity investment had occurred as of the beginning of the year ended December 31, 2023.
8. CASH AND CASH EQUIVALENTS
The breakdown of cash and cash equivalents is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)¥603,740¥390,678$2,774

Cash and time deposits due within three months

Cash and cash equivalents are classified as financial assets measured at amortized cost.
The above amounts have been offset and eliminated from the amounts deposited in a cash pool account (the previous fiscal year:¥39,105 million, the current fiscal year: ¥25,936 million ($184 million)), which were accounted for as loans from Dentsu Group Inc. to Dentsu
International Limited.
9. TRADE AND OTHER RECEIVABLES
The breakdown of trade and other receivables is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)$10,634¥1,497,687¥1,497,628

Other

39,62032,843233

Allowance for doubtful accounts(5,350)(6,182)(44)¥1,531,957¥1,524,289$10,823

Notes and accounts receivable—trade

Total

Trade and other receivables are presented net of allowance for doubtful accounts in the Consolidated Statement of Financial Position.
Trade and other receivables are classified as financial assets measured at amortized cost.
10. INVENTORIESThe breakdown of inventories is as follows:
FY2022(As of December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Work-in-process

¥247

¥756

$5

Other

3,423

5,639

40

Total

¥3,670¥6,396$45

43

Dentsu Group Integrated Report 2024

11. OTHER FINANCIAL ASSETS(1) The breakdown of other financial assets is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Derivative assets¥26,679¥18,614$132

Equity securities

93,58083,053590

Debt securities

642

2,161

15

76,25365,592466

Other
Allowance for doubtful accounts(10,037)(12,520)

(89)

Total

¥187,118¥156,902$1,114Current assets

18,731

23,135164

Non-current assets

168,386

133,766

950

Total

¥187,118¥156,902$1,114

Other financial assets are presented net of allowance for doubtful accounts in the Consolidated Statement of Financial Position.
In addition, derivative assets include those which hedge accounting is applied.
Derivative assets are classified as financial assets measured at fair value through profit or loss, equity securities are classified as financial
assets measured at fair value through other comprehensive income. Debt securities and the “Other”, ¥16,906 million and ¥20,980 million ($149
million), respectively as of December 31, 2022 and 2023 are classified as financial assets measured at fair value through profit or loss, ¥18,405
million and ¥6,511 million ($46 million), respectively as of December 31, 2022 and 2023 are classified as financial assets measured at fair value
through other comprehensive income, remainder is classified as financial assets measured at amortized cost.
(2) Major securities held as financial assets measured at fair value through other comprehensive income and their respective fair values are
as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Marketable stocks (Note 1)¥53,973¥59,323$421

Non-marketable stocks (Note 2)

58,011

30,240215¥111,985¥89,564

$636

Total
(Note 1) Major securities in each fiscal year are as follows.

Investees(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)$150

Recruit Holdings Co., Ltd.

¥14,828¥21,168

Digital Garage, Inc.

10,7428,605

61

TBS HOLDINGS, INC.

3,921

7,677

55

(Note 2) Major securities are the one relating to sporting digital contents distribution business, the one relating to ballpark operation business, and the one relating
to Internet browsers. The fair values of them as of December 31, 2022 and 2023 are ¥6,512 million and ¥— million ($— million), ¥4,248 million and ¥2,947
million ($21 million), and ¥8,895 million and ¥4,074 million ($29 million), respectively.

44

Dentsu Group Integrated Report 2024

Financial Report 2024

Equity securities are designated as financial assets measured at fair value through other comprehensive income since they are held mainly forstrengthening relationships with investees.
In order to enhance the efficiency of assets held and to use them effectively, sales (derecognition) of financial assets measured at fair value
through other comprehensive income are being carried out.
The fair value and cumulative gain or loss that was recognized in as other comprehensive income (before tax) at the date of sales withinequity for each fiscal year is as follows:
FY2022: Year ended December 31, 2022
(Millions of Yen)

Cumulative gain or loss recognized in equity
as other components of equity

Fair value¥25,710¥18,127

FY2023: Year ended December 31, 2023
(Millions of Yen)

Cumulative gain or loss recognized in equity
as other components of equity

Fair value¥12,152¥7,806FY2023: Year ended December 31, 2023
(Millions of U.S. Dollars)

Cumulative gain or loss recognized in equity
as other components of equity

Fair value
$86

$55

The cumulative gain or loss recognized in equity as other components of equity are transferred to retained earnings when an equity instrument
is sold or its fair value declined significantly. The cumulative gain or loss (after tax) transferred to retained earnings was ¥(23,355) million and¥(5,652) million ($(40) million) for the years ended December 31, 2022 and 2023, respectively.

45

Dentsu Group Integrated Report 2024

12. OTHER CURRENT ASSETS
No advance payments included in other current assets are expected to be recognized in profit or loss after more than 12 months.
13. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
The breakdown of non-current assets classified as held for sale as of December 31, 2022 and 2023 is as follows.
Components of non-current assets classified as held for sale
FY2022(As of December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Non-current assets classified as held for sale
Cash and cash equivalents
Trade receivables and other receivables

¥886

¥834

$6

38,16565,964468

Inventories

7

3

0

Income tax receivables

2

1,653

12

Other financial assets (current)

1,281

123

1

Other current assets

1,458

1,747

12

16

17

0

–

1

0

Property, plant and equipment
Intangible assets
Investments accounted for using the equity method

2,383

–

–

Other financial assets (non-current)

13,003

10,034

71¥57,204¥80,380

$571

Total
Liabilities directly associated with non-current assets classified asheld for sale¥27,666¥43,281$307

Bonds and Borrowings (current)

4,730

11,17079

Other financial liabilities (current)

796

6,459

46

Other current liabilities

1,142

3,864

27

Other financial liabilities (non-current)

3,185

10

0

128

927

7

Trade and other payables

Other non-current liabilities
Deferred tax liabilities
Total

90

813

6

¥37,740¥66,527$472

Non-current assets classified as held for sale and non-current liabilities directly associated with non-current assets classified as held for saleas of December 31, 2022 and 2023 consist mainly of assets and liabilities associated with the Russia business unit. In addition to the above,
non-current assets classified as held for sale as of December 31, 2022 and 2023 include shares, held by the Group in Japan unit.

46

Dentsu Group Integrated Report 2024

Financial Report 2024

Details of the Russia business and other assets as of December 31, 2022 are as follows.
(Millions of Yen)
Russia business

Other

Total

Non-current assets classified as held for sale
Cash and cash equivalents
Trade receivables and other receivables

¥886

–

¥886

38,165–38,165Inventories

7

–

7

Income tax receivables

2

–

2

Other financial assets (current)

1,187

93

1,281

Other current assets

1,458

–

1,458

Property, plant and equipment

16

–

16

–

2,383

2,383

Investments accounted for using the equity method
Other financial assets (non-current)
Total

–

13,00313,003¥41,724¥15,480¥57,204

Liabilities directly associated with non-current assets classified asheld for sale¥27,666–¥27,666

Bonds and borrowings (current)

Trade and other payables

4,730

–

4,730

Other financial liabilities (current)

796

–

796

Other current liabilities

1,142

–

1,142

Other financial liabilities (non-current)

3,185

–

3,185

Other non-current liabilities

128

–

128

Deferred tax liabilities

90

–

90

¥37,740–¥37,740

Total

Details of the Russia business and other assets as of December 31, 2023 are as follows.
(Millions of Yen)
Russia business

Other

Total

Non-current assets classified as held for sale
Cash and cash equivalents
Trade receivables and other receivables

¥408

¥426

¥834

65,632332

65,964

0

2

3

1,653

–

1,653

Inventories
Income tax receivables

117

5

123

1,738

9

1,747

Property, plant and equipment

–

17

17

Intangible Assets

–

1

1

Other financial assets (non-current)–

10,034

10,034¥69,550¥10,830¥80,380

Trade and other payables¥43,174¥106¥43,281Bonds and borrowings (current)

11,170–11,170

Other financial liabilities (current)

6,392

66

6,459

Other current liabilities

3,801

62

3,864

Other financial liabilities (non-current)

10

–

10

Other non-current liabilities

927

–

927

Other financial assets (current)
Other current assets

Total
Liabilities directly associated with non-current assets classified asheld for sale

Deferred tax liabilities
Total

47

813

–

813

¥66,291¥236¥66,527

Dentsu Group Integrated Report 2024

(Millions of U.S. Dollars)
Russia business

Other

Total

Non-current assets classified as held for sale
Cash and cash equivalents

$3

$3

$6

Trade receivables and other receivables

466

2

468

Inventories

0

0

0

Income tax receivables

12

–

12

Other financial assets (current)

1

0

1

Other current assets

12

0

12

Property, plant and equipment

–

0

–

Intangible Assets

–

0

–

–

71

71

$494

$77

$571

$307

Other financial assets (non-current)
Total
Liabilities directly associated with non-current assets classified asheld for sale

$307

$1

Bonds and borrowings (current)

79

–

79

Other financial liabilities (current)

45

0

46

Other current liabilities

27

Trade and other payables

27

0

Other financial liabilities (non-current)

–

–

–

Other non-current liabilities

7

–

7

6

–

6

$471

$2

$472

Deferred tax liabilities
Total

In March 2022, the Group began reviewing its business in Russia to ensure compliance with Dentsu Group policies and applicable laws. The
agreement to sell the equity to our local partners was signed in November 2022.
In view of this situation, in the year ended December 31, 2022, the Group has classified assets and liabilities related to the Russia businessas held for sale, and recorded an impairment loss of ¥23,372 million. In addition, “Other components of equity” in the Consolidated Statementof Financial Position as of December 31,2022 and December 31,2023 include accumulated other comprehensive income (primarily, exchange
differences on transaction of foreign operations) amount to ¥(15,051) million and ¥(19,874) million ($(141) million) respectively.
14. PROPERTY, PLANT AND EQUIPMENT
The schedule of the carrying amount during the period is as follows :FY2022: Year ended December 31, 2022
(Millions of Yen)

Balance at the beginning of the year

Buildings andstructures

Land

Other

Total

¥19,572¥6,109¥10,988¥36,670

2,151

0

4,620

6,772

201

–

325

527

(4,130)(3,588)(1,233)(8,952)

–

–

(61)

(61)

(4,599)–(4,687)(9,286)

(15)

–

(715)

(731)

1,286

20

864

2,171

Acquisition due to purchases
Acquisitions through business combinations
Sales or disposals
Reclassification to non-current assets classified as held forsale (Note 1)
Depreciation
Impairment losses (Note 2)
Exchange differences on translation of foreign operations
Other
Balance at the end of the year

(74)

18

(475)

(531)

¥14,392¥2,560¥9,625¥26,577

48

Dentsu Group Integrated Report 2024

Financial Report 2024

FY2023: Year ended December 31, 2023
(Millions of Yen)
Buildings andstructures

Land

Other

Total

¥14,392¥2,560¥9,625¥26,577

4,481

–

6,067

10,549

258

–

737

995

Sales or disposals(1,098)

(17)

(89)

(1,205)

Depreciation

Balance at the beginning of the year
Acquisition due to purchases
Acquisitions through business combinations(3,329)–(4,538)(7,868)

Impairment losses (Note 2)

(37)

(113)

(67)

(218)

Exchange differences on translation of foreign operations

339

86

523

950

Other

(216)

–

(133)

(349)

¥14,789¥2,516¥12,124¥29,430

Balance at the end of the year
FY2023: Year ended December 31, 2023

(Millions of U.S. Dollars)
Buildings andstructures

Land

Other

Total

$102

$18

$68

$189
75

Balance at the beginning of the year
Acquisition due to purchases

32

–

43

Acquisitions through business combinations

2

–

5

7

Sales or disposals

(8)

0

(1)

(9)

Depreciation

(24)

–

(32)

(56)

Impairment losses (Note 2)

0

(1)

0

(2)

Exchange differences on translation of foreign operations

2

1

4

7

Other

(2)

–

(1)

(2)

$105

$18

$86

$209

Balance at the end of the year

(Note 1) For details, please refer to “13. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE”.
(Note 2) Impairment loss is recorded in the Consolidated Statement of Income as “Impairment loss” and “Restructuring cost.”

The acquisition cost, accumulated depreciation and impairment losses, and carrying amount of property, plant and equipment are as follows:(Millions of Yen)
Buildings andstructures

Land

Other

Total

¥115,659

FY2022 (As of December 31, 2022)
Acquisition cost

¥56,456¥2,565¥56,637

Accumulated depreciation and impairment losses

42,063

4

47,012

89,081

Carrying amount¥14,392¥2,560¥9,625¥26,577¥95,883

FY2023 (As of December 31, 2023)
Acquisition cost

¥40,967¥2,635¥52,280

Accumulated depreciation and impairment losses

26,178

118

40,15566,452Carrying amount¥14,789¥2,516¥12,124¥29,430

Buildings andstructures

Land

Other

Total

Acquisition cost

$291

$19

$371

$681

Accumulated depreciation and impairment losses

186

1

285

472

Carrying amount

$105

$18

$86

$209

(Millions of U.S. Dollars)

FY2023 (As of December 31, 2023)

There is no property, plant and equipment whose title is restricted or pledged as security for liabilities.
Depreciation is recorded in the Consolidated Statement of Income as “Cost of sales” and “Selling, general and administrative expenses.”

49

Dentsu Group Integrated Report 2024

15. GOODWILL AND INTANGIBLE ASSETS(1) Schedule of goodwill and intangible assets
The schedule of the carrying amount during the period is as follows :FY2022: Year ended December 31, 2022
(Millions of Yen)

Balance at the beginning of the year

Goodwill

Customer
relationships

Software

Other

Total

¥670,749¥117,722¥24,412¥45,040¥857,924

–

–

9,920

8,109

18,03034,941

38,963154

1,188

75,247

(518)

–

(393)

(34)

(947)

(9,751)(4,572)

(3)

(539)

(14,867)

Acquisition due to purchases
Acquisitions through business combinations (Note 1)
Sales or disposals
Reclassification to non-current assets classified as held forsale (Note 2)
Amortization–(21,846)(7,586)(7,367)(36,800)

Impairment losses (Note 3)(9,929)(2,057)

(267)

(837)

(13,092)

Exchange differences on translation of foreign operations

64,321

7,728

331

3,513

75,895

(56)

(316)

(77)

61

(388)

¥749,755¥135,622¥26,490¥49,134¥961,002

Goodwill

Customer
relationships

Software

Other

Total

¥749,755¥135,622¥26,490¥49,134¥961,002

–

–

9,464

21,15330,61785,871

25,765

189

7,992

119,818

Other
Balance at the end of the year

FY2023: Year ended December 31, 2023
(Millions of Yen)

Balance at the beginning of the year
Acquisition due to purchases
Acquisitions through business combinations (Note 1)
Sales or disposals

–

–

(405)

(1,076)(1,482)

Amortization–(24,481)(7,684)(12,353)(44,519)

Impairment losses (Note 3)(66,013)(5,128)

(205)

(636)

(71,983)

Exchange differences on translation of foreign operations

61,612

10,546681

3,644

76,485

(104)

0

(74)

94

(84)

¥831,121¥142,323¥28,456¥67,953¥1,069,855

Goodwill

Customer
relationships

Software

Other

Total

$5,323

$963

$188

$349

$6,823217

Other
Balance at the end of the year

FY2023: Year ended December 31, 2023
(Millions of U.S. Dollars)

Balance at the beginning of the year

–

–

67

150

610

183

1

57

851

–

–

(3)

(8)

(11)

Acquisition due to purchases
Acquisitions through business combinations (Note 1)
Sales or disposals

–

(174)

(55)

(88)

(316)

Impairment losses (Note 3)

(469)

(36)

(1)

(5)

(511)

Exchange differences on translation of foreign operations

437

75

5

26

543

Other

(1)

0

(1)

1

(1)

$5,901$1,011$202$482$7,596

Amortization

Balance at the end of the year

(Note 1) Acquisitions through business combinations include measurement period adjustments that have not been applied retrospectively due to immateriality.
(Note 2) For details, please refer to “13. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE.“(Note 3) Impairment losses are recorded in the Consolidated Statement of Income as “Impairment loss“ and “Restructuring cost.“

50

Dentsu Group Integrated Report 2024

Financial Report 2024

The acquisition cost, accumulated amortization and impairment losses, and carrying amount of goodwill and intangible assets are as follows:(Millions of Yen)
Goodwill

Customer
relationships

Software

Other

Total

Acquisition cost¥982,992¥351,485¥128,385¥150,006¥1,612,869

Accumulated amortization and impairment losses

233,236

215,863

101,895

100,871

651,867

Carrying amount¥749,755¥135,622¥26,490¥49,134¥961,002¥1,865,521

FY2022 (As of December 31, 2022)

FY2023 (As of December 31, 2023)¥1,130,664¥407,515¥136,552¥190,788

Accumulated amortization and impairment losses

299,542

265,192

108,095

122,835

795,665

Carrying amount¥831,121¥142,323¥28,456¥67,953¥1,069,855

Goodwill

Customer
relationships

Software

Other

Total

$13,246

Acquisition cost

(Millions of U.S. Dollars)

FY2023 (As of December 31, 2023)
Acquisition cost

$8,028$2,893$970$1,355

Accumulated amortization and impairment losses

2,127

1,883

768

872

5,649

Carrying amount$5,901$1,011$202$482$7,596

There are no intangible assets whose title is restricted or pledged as security for liabilities.
Amortization is recorded in the Consolidated Statement of Income as “Cost of sales“ and “Selling, general and administrative expenses.“(2) Significant goodwill and intangible assets
Significant goodwill as of December 31, 2023 is ¥23,219 million ($165 million,) in Japan, ¥572,331 million ($4,064 million) in the Americas,¥235,570 million ($1,673 million) in the EMEA and the carrying amount in APAC is ¥nil. Significant goodwill as of December 31, 2022 was ¥23,288
million in Japan, ¥482,887 million in the Americas, ¥192,121 million in the EMEA and ¥51,460 million in the APAC.
Significant intangible assets other than goodwill consist of customer relationships, which amount to ¥28,418 million ($202 million) in Japan,¥47,117 million ($ 335 million) in the America, ¥54,199 million ($385 million) in the EMEA and ¥12,588 million ($89 million) in the APAC as ofDecember 31, 2023. Customer relationships as of December 31, 2022 amounted to ¥31,106 million in Japan, ¥42,076 million in the Americas,¥48,130 million in the EMEA and ¥14,310 million in the APAC. Among them, the customer relationships recognized when the Company acquired
Dentsu Aegis Network Ltd. (currently ”Dentsu International Limited”) in March 2013 was ¥69,330 million and ¥67,779 million ($481 million) as ofDecember 31, 2022 and 2023, respectively, of which the remaining amortization period as of December 31, 2023 is 7 years.
(3) Impairment testing of goodwill
A. Results of impairment test of goodwill
Based on the latest business plan compiled using the most recent results, the Company conducted an impairment test of goodwill. As aresult, the Company recognized impairment loss of ¥67,804 million ($481 million) on the entire goodwill and some intangible assets in the
cash-generating unit group to which the goodwill of the APAC had been allocated. The recoverable amount in the said cash-generating unitgroup is ¥11,218 million ($80 million) for the fiscal year ended December 31, 2023.
In the fiscal year ended December 31, 2022, the Company conducted an impairment test of goodwill related to the entire International
business segment based on the latest business plan compiled using the most recent results. As a result, the Group recognized impairment loss
on goodwill of ¥9,262 million in the cash-generating unit group to which the goodwill of the APAC had been allocated. The recoverable amountin the said cash-generating unit group is ¥61,994 million for the year ended December 31, 2022.
B. Overview of impairment test of goodwill
In valuing goodwill, the Company conducts an impairment test for Japan, Americas, EMEA, and APAC with each acting as a separate group of
cash-generating units, and the Company furthermore conducts an impairment test on the entire International business and the entire Group.
From the fiscal year ended December 31, 2023, the Company transitioned to a global management structure through the “One Management
Team”, which governs four business regions worldwide (Japan, Americas, EMEA, and APAC), to accelerate business transformation, further
enhance management, and realize the Group’s business growth and enhance our corporate value. In response, the allocation of goodwill in theJapanese operations was reviewed and the entire Japanese operations were tested for impairment as a single cash-generating unit group.
The recoverable value is calculated using the value in use based on the budget for the following fiscal year approved by the management

51

Dentsu Group Integrated Report 2024

and the forecast for the additional four subsequent fiscal years. The key assumptions and inputs used to calculate the value in use are as follows:
FY2022(As of December 31, 2022)
Japan

Americas

Operating Margin

–

23.2%
~24.7%

Medium-term growth rates for net
revenue (Note 1)

–

5.7%
~9.3%

EMEA

APAC

22.0%
~23.9%

17.6%~19.0%

7.0%

3.0%

FY2023(As of December 31, 2023)
Japan

Americas

EMEA

APAC

22.2%

22.0%
~23.9%

20.2%~21.5%

12.3%~14.6%

3.0%

2.7%
~4.6%

3.0%
~5.1%

1.6%
~2.3%

Perpetual growth rates (Note 2)

–

2.0%

1.5%

2.0%

2.0%

2.0%

1.5%

2.0%

Pre-tax discount rates

–

10.2%

12.5%

16.1%

8.7%

10.0%

11.9%

14.8%

Estimate of net working capital–In general, the Company estimates the long-term expected net working capital based on the
average of the past two years and the budget for the following financial year.

Allocating ratio of central costs–

In the impairment test of goodwill for each cash-generating unit group, central costs areallocated to each cash-generating unit group based on a rational and consistent calculation.

(Note 1) The medium-term growth rate for net revenue in cash flows for the four-year period from the following fiscal year is based on the Medium-Term Management
Plan and in light of the actual results of the current fiscal year and budgets for the following fiscal year.
(Note 2) The perpetual growth rates set for cash flows for a period exceeding 5 year ranges.

C. Sensitivity analysis
The following are the key quantitative assumptions for impairment to be recognized in each region, assuming that all the other variables are held
constant, for impairment tests in the fiscal year ended December 31, 2023. These assumptions, which significantly influence estimated value in
use, may be affected by changes in business strategies or changes in market conditions and are therefore subject to uncertainty.

EMEA

EMEA

Change necessary for the recognition of impairment,
assuming that all the other variables are held constant

Excess of recoverable
amount over carrying
amount (Millions
of Yen)Pre-tax
discount rates

Medium-term
growth rates

Perpetual
growth rates

Operatingmargin¥39,600+0.94 pt.

-3.61 pt.

-1.34 pt.

-1.38 pt.

Change necessary for the recognition of impairment,
assuming that all the other variables are held constant

Excess of recoverable
amount over carrying
amount (Millions of
U.S. dollars)

Pre-tax
discount rates

Medium-term
growth rates

Perpetual
growth rates

Operatingmargin$281+0.94 pt

-3.61 pt

-1.34 pt

-1.38 pt

(Japan, Americas, the whole International business and the entire Group)
The recoverable amounts of the cash-generating unit groups, to which the goodwill of Japan and Americas had been allocated, and of the wholeinternational business and of the entire Group, are well above their respective carrying amounts. It is therefore evaluated that the recoverable
amount of the said cash-generating unit groups is unlikely to fall below their carrying amounts, even if the key assumptions are changed within areasonable extent.
16. LEASES(1) Schedule of right-of use assets
The carrying amount of right-of-use assets and changes during the period by type of underlying assets is as follows:
FY2022: As of December 31, 2022
(Millions of Yen)
Right-of-use assets

Balance at the beginning of the year

Buildings and structures

Other (Property, plantand equipment)

SoftwareTotal¥133,645¥3,365¥824¥137,836

Acquisition due to purchases

55,953

1,602

501

58,056

Acquisitions through business combinations

1,503

9

–

1,512

Amortization(27,431)

(428)

(224)

(28,084)

Impairment losses (Note)(7,285)––(7,284)

Exchange differences

5,046

62

–

5,108

(22,378)(1,382)(4)(23,766)¥139,052¥3,228¥1,097¥143,379

Other
Balance at the end of the year

(Note) Impairment losses are recorded in the Consolidated Statement of Income as “Restructuring cost”.

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Dentsu Group Integrated Report 2024

Financial Report 2024

FY2023: As of December 31, 2023
(Millions of Yen)
Right-of-use assets
Buildings and structures

Other (Property, plantand equipment)

SoftwareTotal¥139,052¥3,228¥1,097¥143,379

Acquisition due to purchases

15,4372,719

31

18,187

Acquisitions through business combinations

1,388

40

–

1,428

Amortization(25,449)

(595)

(288)

(26,332)

Balance at the beginning of the year

Impairment losses (Note)(3,062)––(3,062)

Exchange differences

5,397

68

–

5,465

Other

1,593

(1,404)(3)

186¥134,356¥4,057¥837¥139,252

Balance at the end of the year

(Note) Impairment losses are recorded in the Consolidated Statement of Income as “Restructuring cost”.

FY2023: As of December 31, 2023
(Millions of U.S. Dollars)
Right-of-use assets
Buildings and structures

Other (Property, plantand equipment)

Software

Total

$987

$23

$8

$1,018Acquisition due to purchases

110

19

0

129

Acquisitions through business combinations

10

0

–

10

Amortization

(181)

(4)

(2)

(187)

Balance at the beginning of the year

Impairment losses (Note)

(22)

–

–

(22)

Exchange differences

38

0

–

39

Other

11

(10)

0

1

$954

$29

$6

$989

Balance at the end of the year

The Group has been optimizing real estate as a part of its restructuring, and is projecting the use of subleasing for some real estate leaseagreements. In the valuation of cash-generating units that include the right-of-use assets related to lease contracts, in the case when theestimated recoverable amount is lower than the carrying amount, even after considering future subleasing income, the right-of-use assets isrecorded at the recoverable amount in the Consolidated Statement of Financial Position, pursuant to IAS36. The difference between the carrying
amount and the recoverable amount is recorded as an impairment loss in the Consolidated Statement of Income. The recoverable amountis calculated on the assumptions of the basic sublease fee, the expected rate of increase in lease payments over the lease period, the lease
incentive, and void periods including the commencement date of subleasing. In the case where it becomes necessary to revise assumptions forreasons such as changes in the market conditions and the occurrence of unpredictable events, an additional impairment loss or reversal of an
impairment on the right-of-use assets may occur in the following fiscal year.
The closing balance of right-of-use assets (buildings and structures) includes a right-of-use asset related to the lease contract of theoffice building in New York, the U.S., entered by the Group as a lessee in November 2019, which is slated for future subleasing (the lease
contract expires on July 31, 2038). The carrying amount of the right-of-use asset as of December 31, 2022 and December 31, 2023 was ¥24,688
million and ¥25,759 million ($183 million), respectively. If the total income expected from subleasing decreases by 10%, an impairment loss onright-of-use assets of ¥2,499 million ($18 million) will be incurred on these assets. Also, if the commencement date of subleasing is delayed bythree months, an impairment loss on right-of-use assets of ¥827 ($6 million) will be incurred.

53

Dentsu Group Integrated Report 2024

(2) Lease costs and cash flows
Lease costs and cash flows are as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Interest expense on lease obligations¥4,760¥6,822$48

Expenses for short-term leases and leases of low-value assets

6,435

7,615

54

¥46,944¥50,804$361

Total cash outflows related to leases(3) Lease obligation
The maturity analysis of the lease obligation is described in “35. FINANCIAL INSTRUMENTS (4) Liquidity risk”(4) Nature of leasing activity
The Group leases buildings primarily as offices. The lease period for the building is between 1 and 20 years, in some cases, the lessee has theoption to extend the term of the lease for one year or the same period as the original contract.
In the Japan business in particular, many lease contracts for buildings allow the lessee to repeatedly exercise the extension option, and theoption to terminate the contract early if the written notice is given to the other party six months in advance. However, only lease payments for theperiod for which it is reasonably certain that the option will be exercised are included in the measurement of the lease obligation. These option
are used as needed by the leasing entity to utilize the building for its business.
17. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
The financial information of associates and joint ventures is as follows. These amounts take the Group's ownership ratio into account.
(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥3,418¥3,654

$26

185

330

2

¥3,603¥3,984$28

Profit for the year
Other comprehensive income
Comprehensive income for the year

In addition to the above, Impairment loss of investments accounted for using the equity method of ¥5,950 million, gain on sale of investments
in associates of ¥600 million were recognized for the year ended December 31, 2022 and the loss on sale of investments in associates of ¥194
million ($1 million) was recognized for the year ended December 31, 2023.
The Group does not recognize the share of the cumulative amount of losses exceeding the carrying amounts incurred in certain
equity-accounted investees.
Unrecognized losses for each fiscal year and cumulative unrecognized losses for the investments are as follows:

Unrecognized losses(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

¥176

¥214

$2

(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

¥406

¥285

$2

Cumulative unrecognized losses

The Group guarantees bank loans and others obligations of Fortius AG, an equity-accounted investee. The relevant contingent liabilities as ofDecember 31, 2022 and December 31, 2023 were ¥6,472 million and ¥8,812 million ($63 million), respectively.

54

Dentsu Group Integrated Report 2024

Financial Report 2024

18. INCOME TAXES(1) Deferred tax assets and deferred tax liabilities
The breakdown of deferred tax assets and deferred tax liabilities by major causes of their occurrence is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Liability for retirement benefits¥27,095¥19,734$140

Accrued expenses

12,307

12,71290

Carryforwards of tax losses

5,970

6,698

48

Right-of-use assets

47,973

46,797

332

Deferred tax assets

Other
Total deferred tax assets

32,13250,759360¥125,478¥136,702$971

Deferred tax liabilities
Gain on establishment of retirement benefit trust¥(10,131)¥(9,550)$(68)

Unrealized gain on securities(17,474)(17,384)(123)

Valuation differences on intangible assets(53,538)(64,180)(456)

Lease obligations(28,375)(27,280)

(194)

Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)(14,873)(17,459)(124)¥(124,392)¥(135,855)$(965)¥1,087¥847$6Changes in net deferred tax assets (liabilities) are as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥(4,281)¥1,087$8

13,472

3,394

24

Effective portion of the change in the fair value of cash flow
hedges(7,003)2,439

17

Net change in financial assets measured at fair value throughother comprehensive income

4,636(1,866)(13)

Remeasurements of defined benefit plans(1,591)(5,552)(39)

Other changes(4,146)1,345

10¥1,087¥847$6

Net deferred tax assets (liabilities)
Balance at the beginning of the year
Deferred income taxes
Deferred taxes related to components of other comprehensive
incomeBalance at the end of the year

Taxable temporary differences, future taxable income determinations and tax planning are taken into account when recognizing deferred
tax assets.
The breakdown of deductible temporary differences and carryforwards of tax losses, for which deferred tax assets are not recognized in
the Consolidated Statement of Financial Position, is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Deductible temporary differences¥100,127¥102,350$727

Carryforwards of tax losses

152,021

192,620

1,368

55

Dentsu Group Integrated Report 2024

The breakdown of carryforwards of tax losses by expiry date as of December 31, 2022 and 2023, for which deferred tax assets are not recognizedin the Consolidated Statement of Financial Position, is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Within 1 year

¥1,794¥3,070$22

Within 2 years

412

2,610

19

Within 3 years

3,945

4,231

30

Within 4 years

1,844

3,680

26

Within 5 years

6,609

6,946

49

Over 5 years

27,19653,142377

Indefinite periods

110,218

118,938

844

Total

¥152,021¥192,620$1,368The total amount of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, for which deferred
tax liabilities are not recognized amounted to ¥168,812 million and ¥158,407 million ($1,125 million) as of December 31, 2022 and 2023, respectively.
Deferred tax liabilities are not recognized for these differences since the Group is able to control the timing of the reversal of the temporary
difference and it is probable the temporary difference will not reverse in the foreseeable future.
(2) Income tax expense
The breakdown of income tax expense is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Current income taxes¥48,455¥41,967$298

Deferred income taxes(13,472)(3,394)(24)(3) Reconciliation of effective tax rate
The breakdown of major items that caused differences between the effective statutory tax rate and income tax rate after applying tax effectaccounting is as follows:
The Company is mainly subject to corporate tax, inhabitant tax and enterprise tax. The effective statutory tax rates calculated based on thesetaxes are 31.0% for the years ended December 31, 2022 and 2023. Foreign subsidiaries are subject to income taxes at their respective locations.
(%)
FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

31.0

31.0

Non-deductible items, such as entertainment expenses

1.2

3.5

Changes in contingent consideration

4.4

5.3

Changes in put option liabilities

(0.7)

(3.1)

Share of profit of investments accounted for using the equity method

(1.1)

(3.4)

Investments accounted for using the equity method

1.8–

Revaluation gain or loss on step acquisition

(1.7)

(0.1)

Effective statutory tax rate
(Reconciliation)

Changes in unrecognized deferred tax assets

(5.6)

18.0

Impairment of goodwill

6.0

61.6

Difference in tax rates of foreign subsidiaries

(3.2)

(1.3)

Other

2.6

5.1

34.7

116.5

Income tax rate after applying of tax effect accounting

56

Dentsu Group Integrated Report 2024

Financial Report 2024

(4) Top-up tax under the global minimum tax rules
The Group operates businesses in several countries that have established new laws on the application of top-up tax under the global minimum
tax rules, such as Japan and the U.K. The Group expects top-up tax to be applied for its businesses in a few countries with statutory tax ratesof 15% or less, or close to 15%. However, this has had no impact on the Group’s taxation in the fiscal year ended December 31, 2023, as the
new laws established in Japan, the U.K., and elsewhere only came into force on January 1, 2024. The Group applies a temporary, mandatory
exception when accounting for deferred tax related to the impact of top-up tax, recognizing this impact in current tax as it occurs. Even if the
top-up tax had been applicable in the fiscal year ended December 31, 2023, the impact on the consolidated financial statements would havebeen insignificant. Please refer to “3. MATERIAL ACCOUNTING POLICIES (21) Changes in Accounting Policies” for details.
19. TRADE AND OTHER PAYABLES(1) The breakdown of trade and other payables is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)$10,397¥1,470,374¥1,464,294

Other

62,21663,317450

Total¥1,532,591¥1,527,612$10,846

Notes and accounts payable—trade

Trade and other payables are classified as financial liabilities measured at amortized cost.
(2) Assets pledged as collateral for liabilities
Assets pledged as collateral and corresponding liabilities are as follows:
Assets pledged as collateral(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

¥870

¥54

$0

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)¥5,441––Other financial assets (current assets)
Corresponding liabilities

Notes and accounts payable

In addition to the above, other financial assets (current assets) of ¥8 million ($0 million) are pledged as collateral for guarantee transactions
related to the “Official Gazette” (Kanpou), sales etc. as of December 31, 2022 and 2023, respectively.

57

Dentsu Group Integrated Report 2024

20. BONDS, BORROWINGS, AND OTHER FINANCIAL LIABILITIES(1) Breakdown of financial liabilities
The breakdown of bonds, borrowings, and other financial liabilities are as follows:(Millions of Yen)FY2023(As of December 31, 2023)

Derivative liabilities¥5,828¥31,250–$222

Put option liabilities

21,493

14,359–$102

Current portion of bonds (Note)

34,983–

Bonds

164,676

164,747

Date of maturity
redemption(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)––
2025~2030

1,170
278

Short-term borrowings

28,754

39,200–Current portion of long-term borrowings

32,052

13–

0

Short-term lease obligations

33,48235,365–251

Long-term borrowings

271,963

290,4852025~2030

2,063

Long-term lease obligations

190,678

183,6532025~2038

1,304

Other (Contingent consideration, etc.)

63,56642,847

–

304

Total

¥847,479¥801,921–$5,694Current liabilities¥188,028¥110,330$783

Non-current liabilities

659,451

691,590

4,910

Total

¥847,479¥801,921$5,694

Derivative liabilities include those to which hedge accounting is applied.
Derivative liabilities are classified as financial liabilities measured at fair value through profit or loss.
Borrowings are classified as financial liabilities measured at amortized cost. The average interest rates of short-term borrowings and long-termborrowings (including the current portion of long-term borrowings) for year ended December 31, 2023 are 6.74% and 1.25%, respectively.
Conditional consideration is calculated based on the performance of the acquired company and may range from a minimum of zero to a
maximum of ¥122,844 million and from a minimum of zero to a maximum of ¥28,473 million ($202 million) in the year ended December 31, 2022
and 2023, respectively.
”Other (contingent consideration, etc)” includes financial liabilities measured at fair value through profit or loss of ¥38,425 million and¥20,185 million ($143 million) as of December 31, 2022 and 2023, respectively. Remaining amounts are classified as financial liabilities measured
at amortized cost.
Financial covenants are attached to certain borrowings as of December 31, 2022. The Group has complied with these covenants. The Group
monitors these covenants to maintain the required level.
(Note) A summary of the terms of the bonds issued is as follows:

Company name

Bonds

FY2022
FY2023(As of December (As of December
31, 2022)
31, 2023)

Date of issue(Millions of yen)

(Millions of U.S.
Dollars)

Interest
rate (%) Collateral

Date of redemption

FY2023(As of December
31, 2023)

Dentsu Group Inc. First unsecured bondOctober 25, 2018¥34,983

–

0.110

N/A

October 25, 2023–

Second unsecured
Dentsu Group Inc.
bond

October 25, 2018

19,972

19,9820.240

N/A

October 24, 2025

142

Dentsu Group Inc. Third unsecured bondOctober 25, 2018

24,946

24,9560.424

N/A

October 25, 2028

177

Fourth unsecured
Dentsu Group Inc.
bond

July 8, 2020

49,93349,9600.220

N/A

July 8, 2025

355

Dentsu Group Inc. Fifth unsecured bondJuly 8, 2020

9,978

9,983

0.320

N/A

July 8, 2027

71

Dentsu Group Inc. Sixth unsecured bondJuly 8, 2020

59,84859,8680.490

N/A

July 8, 2030

425

¥199,660¥164,747–––$1,170

Total

–

–

58

Dentsu Group Integrated Report 2024

Financial Report 2024

(2) Changes in liabilities arising from financing activities
FY2022: Year ended December 31, 2022
(Millions of Yen)
Balance at the
beginning of
the year

Changes fromcash flows
from financing
activities

Non-cash changes
Newly
Changes fromrecognized remeasurements

Increase due
to businesscombination

Exchangedifferences andothersBalance atthe end of
the year

Short-term borrowings¥40,007¥(5,832)–––¥(5,420)¥28,754

Long-term borrowings (Note 1)

339,613(55,181)

–

–

2,804

16,780304,016

Lease obligations (Note 1, 3)

192,082(35,748)

57,849

–

1,720

8,259

224,161

Put option liabilities (Note 1, 2)

34,029(6,317)

6,324(2,223)–(10,319)

21,493

Bonds (Note 1)

199,569

–

–

–

–

90

199,660

Total¥805,302¥(103,080)¥64,173¥(2,223)¥4,524¥9,389¥778,084(Note 1) The above includes current liabilities due within one year.
(Note 2) Changes from remeasurements includes interest expense from the passage of time.
(Note 3) ¥48,465 million of ¥57,849 million in “Newly recognized” was due to an increase in right-of-use assets related to the lease agreement of an office building in
New York, the U.S. For details, please refer to “16. LEASES (1) Right-of-use assets included in the carrying amount of fixed assets.

FY2023: Year ended December 31, 2023
(Millions of Yen)
Balance at the
beginning of
the year

Changes fromcash flows
from financing
activities

Non-cash changes
Newly
Changes fromrecognized remeasurements

Increase due
to businesscombination

Exchangedifferences andothersBalance atthe end of
the year

Short-term borrowings¥28,754¥12,884––¥57¥(2,496)¥39,200

Long-term borrowings (Note 1)

304,016(37,824)––4

24,301

290,498
219,018

Lease obligations (Note 1)

224,161(36,367)

17,482–

2,133

11,610Put option liabilities (Note 1, 2)

21,493(6,769)7,192(3,338)–(4,219)14,359Bonds (Note 1)

199,660(35,000)

–

–

–

87

164,747

Total¥778,084¥(103,076)¥24,674¥(3,338)¥2,195¥29,283¥727,823(Note 1) The above includes current liabilities due within one year.
(Note 2) Changes from remeasurements includes interest expense from the passage of time.

FY2023: Year ended December 31, 2023
(Millions of U.S. Dollars)
Balance at the
beginning of
the year

Changes fromcash flows
from financing
activities

Non-cash changes
Newly
Changes fromrecognized remeasurements

Increase due
to businesscombination

Exchangedifferences andothersBalance atthe end of
the year

Short-term borrowings

$204

$91

–

–

$0

$(18)

$278

Long-term borrowings (Note 1)

2,159

(269)

–

–

0

173

2,063

Lease obligations (Note 1)

1,592

(258)

124

–

15

82

1,555

153

(48)

51

(24)

–

(30)

102

Bonds (Note 1)

1,418

(249)

–

–

–

1

1,170

Total

$5,525$(732)

$175

$(24)

$16

$208

$5,168

Put option liabilities (Note 1, 2)

59

Dentsu Group Integrated Report 2024

21. PROVISIONSThe breakdown and schedule of provisions are as follows:
FY2023: Year ended December 31, 2023
(Millions of Yen)

Balance at the beginning of the year

Provisions for asset
retirement obligations

Provision for
restructuring

Other provisions

Total¥3,116¥21,825¥9,645¥34,587

563

5,722

4,726

11,012

4

–

–

4

(713)

(6,081)(1,889)(8,684)

Additional provisions in the year
Interest expense incurred over the discount period
Provisions used
Provisions released–(1,566)(2,203)(3,769)Exchange differences on translation of foreign operations

1

901

558

1,461

Other

(9)

1,800

(284)

1,507

¥2,963¥22,601¥10,553¥36,119

Current liabilities¥606¥10,053¥7,412¥18,072

Non-current liabilities

2,357

12,5483,140

18,046

Total¥2,963¥22,601¥10,553¥36,119

Provisions for asset
retirement obligations

Provision for
restructuring

Other provisions

Total

Balance at the beginning of the year

$22

$155

$68

$246

Additional provisions in the year

4

41

34

78

Interest expense incurred over the discount period

0

–

–

0

Provisions used

(5)

(43)

(13)

(62)

Balance at the end of the year

FY2023: Year ended December 31, 2023
(Millions of U.S. Dollars)

Provisions released

–

(11)

(16)

(27)

Exchange differences on translation of foreign operations

0

6

4

10

Other

0

13

(2)

11

$21

$160

$75

$256
$128

Balance at the end of the year
Current liabilities

$4

$71

$53

Non-current liabilities

17

89

22

128

Total

$21

$160

$75

$256

(1) Provisions for asset retirement obligations
The probable amount to be paid in the future, taking past results in consideration is recognized in order to settle restoration obligations in lease
contracts for offices that the Group uses.
These expenses are primarily expected to be paid after one year, however may change due to future events such as changes in business plan.
(2) Provision for restructuring
The provision for restructuring for Japan is ¥8,313 million ($59 million) as of December 31, 2023. It primarily consists of the provision forunavoidable costs to fulfill the obligations of an outsourcing agreement with retired employees who became sole proprietors through the early
retirement program.
The Company’s subsidiary, Dentsu Inc., implemented an early retirement program connected to the provision of new career options to theretiring employees in the year ended December 31, 2020. Employees retiring through this program became sole proprietors and entered into
an outsourcing agreement for up to 10 years with the Company’s subsidiary, New Horizon Collective G.K. In connection with the early retirement
program, the Company recorded provision for restructuring for unavoidable costs to fulfill obligations under the above outsourcing agreement
expected to be incurred in the future (over a period of 7 years as of December 31, 2023).
The provision for restructuring for the Americas, EMEA, APAC and Central is ¥8,914 million ($ 63 million), ¥2,266 million ($16 million), ¥1,899
million ($13 million) and ¥1,208 million ($9 million) respectively as of December 31, 2023. It primarily consists of the provisions for workforce
reduction expenses, property optimization expenses, and expenses arising from other related initiatives.

60

Dentsu Group Integrated Report 2024

Financial Report 2024

22. POST-EMPLOYMENT BENEFITSThe Group operates defined benefit corporate pension plans and retirement lump-sum payment plans as defined benefit plans.
The Group and asset managers are required by law to act in the best interests of the plan participants, and is responsible for managing theplan assets in accordance with the designated policy.
Certain domestic consolidated subsidiaries voluntarily operate a retirement benefits trust for defined benefit corporate pension plans andretirement lump-sum payment plans.
In addition, the Company and certain domestic consolidated subsidiaries operate defined contribution pension plans while certain
overseas consolidated subsidiaries operate defined contribution retirement benefit plans.
(1) Reconciliation of defined benefit obligations and plan assets
The reconciliation of the defined benefit obligations and plan assets to the net defined benefit liabilities (assets) recognized in the Consolidated
Statement of Financial Position is as follows:
FY2022(As of December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Funded defined benefit obligations¥94,363¥97,862$695

Plan assets(89,242)(110,833)

(787)
$(92)

Subtotal
Unfunded defined benefit obligations
Total¥5,120¥(12,970)

11,441

10,39974¥16,562¥(2,571)$(18)

Balance recognized in the Consolidated Statement of Financial
Position
Liabilities for retirement benefits¥23,991¥18,120$129

Assets for retirement benefits (Note 1)(7,429)(20,691)(147)

Net defined benefit liabilities (assets) recognized in theConsolidated Statement of Financial Position¥16,562¥(2,571)$(18)(Note 1) Assets for retirement benefits are recorded in the Consolidated Statement of Financial Position as “Other non-current assets.”(2) Schedule of defined benefit obligations
The schedule of defined benefit obligations is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥117,025¥105,805

$751

7,170

5,647

40

486

1,147

8

Actuarial gains and losses (Note 2)(6,942)

3,598

26

Benefits paid

(69)

Balance at the beginning of the year
Current service cost (Note 1)
Interest expense (Note 1)(12,143)(9,748)

Past service cost

(204)

–

–

Exchange differences on translation of foreign operations

315

1,794

13

Impact of business combination and disposal

76

1

0

Others20

14

0¥105,805¥108,261$769

Balance at the end of the year

(Note 1) Current service cost is recorded in the Consolidated Statement of Income as “Cost of sales” and “Selling, general and administrative expenses.” Interest
expenses, net of interest income, are recorded as “Finance expenses.”(Note 2) Actuarial gains and losses arise from changes in financial assumptions, etc.

The weighted average duration of defined benefit obligations as of December 31, 2022 and 2023 is as follows:(Years)
FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

9.8

9.0

Weighted average duration

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Dentsu Group Integrated Report 2024

(3) Schedule of plan assets
The schedule of plan assets is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥94,613¥89,242$634

Interest income

379

955

7

Return on plan assets (excluding amounts included in interest
income)42

21,343

152

Balance at the beginning of the year

Contributions by the employer
Benefits paid
Exchange differences on translation of foreign operations
Balance at the end of the year

839

527

4

(6,815)(2,154)

(15)

182

918

7

¥89,242¥110,833$787

The Group plans to pay contributions of ¥125 million ($1 million) in the year ending December 31, 2024.
(4) Major breakdown of plan assets
The major breakdown of the total of plan assets is as follows:
FY2022(As of December 31, 2022)
Plan assets withquoted market
price in an
active market

Plan assets
without quoted
market price inan active market

Total

Plan assets withquoted market
price in an
active market(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Plan assets
without quoted
market price inan active market

Total

Plan assets withquoted market
price in an
active market

Plan assets
without quoted
market price inan active market

Total

Equity instruments¥43,961–¥43,961¥59,627–¥59,627

$423

–

$423

Debt instruments

2,799

39

2,838

3,121

24

3,145

22

0

22

–

3,116

3,116

–

3,131

3,131

–

22

22

General account of life
insurance companies
Other

–

39,32739,327–44,92844,928

–

319

319

Total

¥46,760¥42,482¥89,242¥62,748¥48,084¥110,833

$446

$341

$787

(Note) Plan assets above include retirement benefit trusts established for defined benefit corporate pension plans and retirement lump-sum payment plans of¥55,386 million and ¥74,979 million ($532 million), as of December 31, 2022 and 2023, respectively.
As of December 31, 2022 and 2023, equity instruments are mainly those issued in Japan and debt instruments are mainly those issued in overseas.

The objectives of plan asset investments are to reduce long-term contribution obligations and improve benefits within a tolerable risk while
securing sufficient assets to grant benefits. To achieve these objectives, medium- to long-term future estimates of pension finance are taken
into account, and the effect of uncertainty in the plan asset management on plan assets financing (such as the possibility of fund shortages) andtolerable levels of uncertainty in the rates of return on plan assets are adequately reviewed.
To achieve these goals, asset investments are managed to achieve these objectives by establishing a policy for future optimal asset
composition ratios (hereinafter referred to as “policy asset allocation”), selecting an asset manager and monitoring asset allocation, after setting
forecasts of expected rates of returns on appropriate assets for investment. The policy asset allocation is verified annually and reviewed asnecessary if any changes are made to the terms and conditions set at the time of the policy’s establishment.
In addition, risk corresponding contributions have been made to prepare for future financial deterioration from the year ended December
31, 2020.
(5) Actuarial assumptions
The major items of actuarial assumptions are as follows:(%)
FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

1.2

1.2

Discount rate

(Note) The sensitivities of the defined benefit obligations due to changes in major assumptions as of each fiscal year are as follows. Each of these analyses assumes
that other variables remain fixed; however, they do not always change independently. Negative figures indicate a decrease in defined benefit obligations,while positive figures indicate an increase.

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Financial Report 2024

(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Increase by 0.5%¥(4,288)¥(3,635)$(26)

Decrease by 0.5%

¥4,641¥3,914$28

Change in assumptions

Discount rate(6) Defined contribution plans
Expenses recognized due to contributions to defined contribution plans by the Company and consolidated subsidiaries amounted to ¥13,498
million and ¥16,032 million ($114 million) for the years ended December 31, 2022 and 2023, respectively.
Such amounts are recorded in the Consolidated Statement of Income as “Cost of sales” and “Selling, general and administrative expenses.”

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Dentsu Group Integrated Report 2024

23. EQUITY AND OTHER EQUITY ITEMS

B. Repurchase of treasury shares(1) Share capital

FY2022: Year ended December 31, 2022

A. Authorized shares

The Company executed the repurchase of treasury shares as

The number of authorized shares as of December 31, 2022 and 2023

follows for the year ended December 31, 2022, based on theis 1,100,000,000 ordinary shares.

resolution by the Board of Directors on February 14, 2022, in
accordance with article 156 of the Companies Act applied with

B. Fully paid and issued shares

article 165, paragraph 3 of the Companies Act, and the articles of

The number of issued shares is as follows:incorporation of the Company.
(ⅰ) Type of shares repurchased: Ordinary shares of the Company

Number of ordinary
shares issued(Shares)

FY2021 (As of December 31, 2021)
Increase (decrease) (Note 2)
FY2022 (As of December 31, 2022)(ⅱ) Total number of repurchased shares: 8,989,700 shares

288,410,000(ⅲ) Total amount of repurchased shares: ¥39,999 million(18,244,646)(ⅳ) Repurchase period: From March 1, 2022 to September 1, 2022

270,165,354(ⅴ) Repurchase method: Market purchase at Tokyo Stock Exchange

Number of ordinary
shares issued(Shares)

FY2022 (As of December 31, 2022)
Increase (decrease)
FY2023 (As of December 31, 2023)

C. Cancellation of treasury shares
FY2022: Year ended December 31, 2022

270,165,354

The Company executed the cancellation of treasury shares as–follows for the year ended December 31, 2022, based on the

270,165,354

resolution by the Board of Directors on November 14, 2022. In(Note 1) All the shares issued by the Company are non-par value ordinary
shares that have no restriction on any content of rights.
(Note 2) The change in the number of issued shares in the fiscal year under
ended December 31, 2022 is a decrease of 18,244,646 shares due tocancellation of treasury shares.

accordance with the provisions of Article 178 of the Companies Act,
resolve to cancel the treasury stock owned by the Company.
(ⅰ) Cancellation date: November 30,2022(ⅱ) Class and number of shares cancelled: 18,244,646 ordinary shares(ⅲ) Cancellation price: ¥4,329 per share(2) Treasury shares(ⅳ) Total amount of cancellation price: ¥78,981 million

A. The number of treasury shares is as follows:
Number of shares(Shares)

FY2021 (As of December 31, 2021)
Increase (decrease) (Note 1)
FY2022 (As of December 31, 2022) (Note 2)(3) Reserves

14,773,421

A. Share premium account(8,983,142)

Under the Companies Act of Japan, at least 50% of the proceeds

5,790,279

upon issuance of equity instruments shall be credited to share

Number of shares(Shares)

FY2022 (As of December 31, 2022)
Increase (decrease) (Note 3)
FY2023 (As of December 31, 2023) (Note 4)

capital, while the remainder of the proceeds shall be credited tocapital reserves included in share premium account.

5,790,279(48,380)

B. Retained earnings

5,741,899

The Companies Act of Japan provides that 10% of the dividends(Note 1) The increase and decrease during the fiscal year ended December
31, 2022 consisted of 8,989,700 shares acquired by resolution of
the Board of Directors, 308,400 shares acquired free of charge
from retired employees of Markle based on transfer-restricted
stock-based compensation agreement, 1,504 shares increased due
to repurchase of shares less than one unit, 15,800 shares decreased
due to the sale of shares by a trust under the performance-based
stock compensation plan, 22,300 shares decreased due to the
grant of shares by the trust under the performance-based stockcompensation plan, and 18,244,646 shares decreased due tocancellation of treasury shares.
(Note 2) The above includes 1,041,900 shares of the Company held by Trust E
in relation to the performance-based stock compensation plan as ofDecember 31, 2022.
(Note 3) The increase and decrease during the fiscal year ended December
31, 2023 consisted of 67,700 shares acquired free of charge fromretired employees of Merkle based on transfer-restricted stock-based
compensation agreement, restricted stock compensation agreement,
987 shares increased due to the repurchase of shares less than one
unit, 45,200 shares decreased due to the sale of shares by a trust
under the performance-based stock compensation plan, 56,400
shares decreased due to the grant of shares by the trust under the
performance-based stock compensation plan, and 15,467 shares
decreased due to the payment of restricted stock compensation.
(Note 4) The above includes 940,300 shares of the Company held by Trust E
in relation to the performance-based stock compensation plan as ofDecember 31, 2023.

paid shall be appropriated as capital reserves or as retained
earnings reserves included in the retained earnings until theiraggregate amount equals 25% of share capital.
(4) Transactions with non-controlling shareholders
FY2022: Year ended December 31, 2022
As stated in “7. BUSINESS COMBINATIONS” on January 4, 2022,
the Group acquired additional shares in Septeni HD, which had
been an equity-accounted investee of the Group, and made it into
a consolidated subsidiary. As a result, non-controlling interests
increased by ¥18,668 million. In addition, as a portion of theconsideration for the acquisition of additional shares in Septeni HD,
the Group partially transferred shares from Dentsu Digital Inc., aconsolidated subsidiary of the Group, to Septeni HD. A difference
between the share transfer price and the carrying amount, as wellas an amount net of taxes pertaining thereto, have been recognized
as a change in retained earnings. As a result, the amount of retained
earnings increased by ¥8,655 million.
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Financial Report 2024

24. DIVIDENDS(1) Dividends paid
FY2022: Year ended December 31, 2022
Resolution

Class of shares

Total dividends(Millions of Yen)

Dividends per share(Yen)

Basis date

Effective date

Board of Directors (February 14,2022)

Ordinary shares¥18,359¥67.00December 31, 2021

March 16, 2022

Board of Directors (August 12, 2022)

Ordinary shares¥18,726¥70.25June 30, 2022

September 9, 2022

(Note) The total amount of dividends based on a resolution of the Board of Directors held on February 14, 2022 includes a dividend of ¥25 million for the Company’s
shares held by the Trust E Unit in relation to the Directors’ Stock Compensation Trust.
The total amount of dividends based on a resolution of the Board of Directors held on August 12, 2022 includes a dividend of ¥24 million for the Company’s
shares held by the Trust E Unit in relation to the Directors’ Stock Compensation Trust.

FY2023: Year ended December 31, 2023
Resolution

Class of shares

Total dividends(Millions of Yen)

Dividends per share(Yen)

Basis date

Effective date

Board of Directors (February 14, 2023)

Ordinary shares¥22,471¥85.00December 31, 2022

March 16, 2023

Board of Directors (August 14, 2023)

Ordinary shares¥20,757¥78.50June 30, 2023

September 12, 2023

Total dividends(Millions of U.S. Dollars)

Dividends per share(U.S. Dollars)

FY2023: Year ended December 31, 2023
Resolution

Class of shares

Basis date

Effective date

Board of Directors (February 14, 2023)

Ordinary shares

$160

$1

December 31, 2022

March 16, 2023

Board of Directors (August 14, 2023)

Ordinary shares

$147

$1

June 30, 2023

September 12, 2023

(Note) The total amount of dividends based on a resolution of the Board of Directors held on February 14, 2023 does not include a dividend of ¥88 million ($1million) for the Company’s shares held by the Trust E Unit in relation to the Directors’ Stock Compensation Trust.
The total amount of dividends based on a resolution of the Board of Directors held on August 14, 2023 does not include a dividend of ¥73 million ($1 million)
for the Company’s shares held by the Trust E Unit in relation to the Directors’ Stock Compensation Trust.

(2) Dividends for which the basis date falls before fiscal year end, while the effective date falls in the following fiscal year
FY2022: Year ended December 31, 2022
Resolution

Class of shares

Source of dividends

Total dividends(Millions of Yen)

Dividends per
share (Yen)

Board of Directors (February 14, 2023)

Ordinary shares

Retained earnings¥22,471¥85.00Basis date

Effective date

December 31, 2022

March 16, 2023

(Note) The total amount of dividends does not includes a dividend of ¥88 million ($1million) for the Company’s shares held by the Trust E Unit in relation to the
Directors’ Stock Compensation Trust.

FY2023: Year ended December 31, 2023
Resolution

Class of shares

Source of dividends

Total dividends(Millions of Yen)

Dividends per
share (Yen)

Board of Directors (February 14, 2024)

Ordinary shares

Retained earnings¥16,129¥61.00Resolution

Class of shares

Source of dividends

Board of Directors (February 14, 2024)

Ordinary shares

Retained earnings

Basis date

Effective date

December 31, 2023

March 14, 2024

FY2023: Year ended December 31, 2023
Total dividends
Dividends per(Millions of U.S. Dollars) share (U.S. Dollars)

$115

$0.43

Basis date

Effective date

December 31, 2023

March 14, 2024

(Note) The total amount of dividends does not include a dividend of ¥57 million ($0 million) for the Company’s shares held by the Trust E Unit in relation to the
Directors’ Stock Compensation Trust.

65

Dentsu Group Integrated Report 2024

25. Revenue
The Group provides advertising, information services and other businesses to our customers. Please refer to “3. MATERIAL ACCOUNTINGPOLICIES (14) Revenues” for details.
(1) Contract balance
The balances of receivables and contractual assets and liabilities arising from signings with customers are as follows:
FY2022(As of December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Balance at the
beginningof the year

Balance at theend of theyear

Balance at the
beginning of
the year

Balance at theend of theyear

Balance at the
beginning of
the year

Balance at theend of theyear¥1,474,909¥1,506,360¥1,506,360¥1,507,016$10,696$10,700

1,464,874

1,497,687

1,497,687

1,497,628

10,634

10,634

10,034

8,673

8,673

9,388

62

67

Contract assets¥6,712¥16,758¥16,758¥19,874

$119

$141

Contract liabilities¥82,465¥72,099¥72,099¥63,963

$512

$454

Receivables arising from contracts with customers
Notes and accounts receivable-trade
Others

Notes and accounts receivable-trade are included in trade and other receivables, others are included in other financial assets in non-current
assets, contract assets are included in trade and other receivables and contract liabilities are included in other current liabilities, in theConsolidated Statements of Financial Position.
The amount of revenue recognized in the years ended December 31, 2022 and 2023 that was included in contract liabilities at the
beginning of the period was ¥80,999 million and ¥66,359 million ($471 million), respectively. In addition, the amount of revenue recognized
during the years ended December 31, 2022 and 2023 from performance obligations satisfied (or partially satisfied) in prior periods is immaterial.
There were no material changes in the balance of contract liabilities during the years ended December 31, 2022 and 2023.
Contract assets are recognized as rights to consideration recorded through the recognition of revenue based on the progress towards
completion in service contracts, mainly for advertisement production and system development. They are reclassified as receivables when rights
to consideration become unconditional. Contract liabilities primarily relate to advances received from customers in the advertising business.
Contract liabilities are transferred to revenue according to the satisfaction of performance obligations.
(2) Calculation of the transaction price allocated to the remaining performance obligations
As there are no significant transactions in the Group where the performance obligations in individual contracts are expected to exceed one year,
the practical expedient has been used and information on residual performance obligations has been omitted. In addition, there are no material
amounts of consideration arising from contracts with customers that are not included in the transaction price.
(3) Assets recognized from costs to obtain or fulfill contracts with customers
The Group has no assets recognized from costs incurred to obtain or fulfill contracts with customers.
26. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The breakdown of selling, general and administrative expenses for each fiscal year is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Employee benefit expenses¥663,854¥721,680$5,124

Depreciation and amortization

71,01970,463500

Other215,894

226,586

1,609

Total

¥950,768¥1,018,730$7,233*1 “Other” includes research and development expenses of ¥1,741million and ¥2,048 million ($15 million) for the years ended December 31, 2022
and 2023, respectively.

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Financial Report 2024

*2 “Other” includes the audit and the non-audit service fees of the Company and consolidated subsidiaries. The breakdown is as follows:(Fees paid to the Company’s auditor)
FY2022(Year ended
December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Audit service

Non-audit
services

Audit service

Non-audit
services

Audit service

Non-audit
services$0

The Company

¥167

¥15

¥203

¥16

$1

The consolidated subsidiaries

439

5

525

2

4

0

Total

¥606

¥21

¥728

¥18

$5

$0

Non-audit services are primarily advisory services on the accounting and the internal control for subsidiaries in Japan.
(Fees paid to the associates of the Company’s auditor)
FY2022(Year ended
December 31, 2022)
Audit service

Non-audit
services(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Audit service

Non-audit
services

Audit service

Non-audit
services

$0

–

¥14

–

¥1

–

The consolidated subsidiaries

2,386

166

2,937

108

21

1

Total

¥2,386¥181¥2,937

¥110

$21

$1

The Company

Non-audit services for the Company are primarily tax filling services. Non-audit services for the consolidated subsidiaries are relating to agreed
upon procedures on earn-out, and tax compliance advisory services.
27. EMPLOYEE BENEFIT EXPENSES
The breakdown of employee benefit expenses for each fiscal year is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥596,788¥640,699$4,549Welfare expenses

86,06997,302691

Post-employment benefits costs

20,571

21,871

155

Termination benefits associated with restructuring

6,497

2,554

18

Stock-based compensation expenses (excluding those attributable
to the acquiree)2,649(1,573)(11)

Salaries, bonuses and allowances

Others
Total

41

2,670

19

¥712,616¥763,525$5,421

Employee benefit expenses are recorded in the Consolidated Statement of Income as “Cost of sales” “Selling, general and administrative
expenses,” and “ Restructuring cost” and “Finance expenses.”
28. OTHER INCOME
The breakdown of other income for each fiscal year is as follows:
FY2022(Year ended
December 31, 2022)

Foreign exchange gains(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥2,967

¥515

$4

4

1,487

11

Gain on liquidation of subsidiaries
Other

1,410

1,024

7

Total

¥4,382¥3,028$21

Profit distribution from the content business, which was previously presented under “Other income” has been included in “Revenue” for the
fiscal year ended December 31, 2023.
As a result, the amounts for the fiscal year ended December 31, 2022 have been retrospectively adjusted to reflect the change in thepresentation. Please refer to “2. BASIS OF PREPARATION (5) Changes in Presentation (Consolidated Statement of Income)” for details of thisretrospective adjustment.
67

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29. OTHER EXPENSES
The breakdown of other expenses for each fiscal year is as follows:
FY2022(Year ended
December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Loss on sale of investments in subsidiaries and associates

¥287

¥256

$2

Other

2,141

1,454

10

Total

¥2,429¥1,710$12

Amortization of long-term prepaid expenses, etc., which was previously presented under “Other expenses” as expenses related to the said profit
distribution, has been included in “Revenue” as a deduction item of revenue.
As a result, the amounts for the fiscal year ended December 31, 2022 have been retrospectively adjusted to reflect the change in thepresentation. Please refer to “2. BASIS OF PREPARATION (5) Changes in Presentation (Consolidated Statement of Income) ” for details of thisretrospective adjustment.
30. FINANCE INCOME AND FINANCE EXPENSES(1) Breakdown of finance income
The breakdown of finance income for each fiscal year is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥3,656¥6,485

$46

1,279

2,702

19

Interest income
Financial assets measured at amortized cost
Dividend income
Financial assets measured at fair value through othercomprehensive income
Gain on valuation of securities
Financial assets measured at fair value through profit or loss
Revaluation of put option liabilities

11,413

65

0

2,223

3,338

24

Dividend income and asset management gains from insurance

404

434

3

Foreign exchange gains (Note1)

299

195

1

Other (Note 2)
Total

424

8,977

64

¥19,701¥22,199$158(Note 1) Foreign exchange gains include valuation gain on currency derivatives.
(Note 2) “Other” above includes a gain from the termination of interest rate swap agreements of ¥7,782 million ($55 million) (including the amounts of othercomprehensive income reclassified to profit or loss) arising from prepayment of borrowings and discontinuation of hedge accounting in the fiscal year ended
December 31, 2023.

The breakdown of dividend income is as follows:
FY2022(Year ended
December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Financial assets derecognized during the fiscal year

¥136

¥75

$1

Financial assets held at the end of the fiscal year

1,143

2,626

19

Total

¥1,279¥2,702$19

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(2) Breakdown of finance expenses
The breakdown of finance expenses for each fiscal year is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥17,329¥22,468

$160

4,873

7,019

50

Interest expense
Financial liabilities measured at amortized cost
Other
Loss on valuation of securities
Financial liabilities measured at fair value through profit or loss
Changes in fair value of contingent consideration

11

1,052

7

14,386

5,621

40

Other

3,345

1,848

13

Total

¥39,947¥38,009$270

31. OTHER COMPREHENSIVE INCOME
Amount arising during the year, reclassification adjustments to profit or loss and income tax effects for each component included in “othercomprehensive income” for each fiscal year are as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥39,694¥8,956$64

39,694

8,956

64

–

–

–

¥39,694¥8,956$64

Amount arising during the year

¥37,042¥(37,429)$(266)

Reclassification adjustments(3,709)18,735133

Pre-tax effects

33,332(18,694)(133)

Tax effects(7,003)2,439

17Effective portion of the change in the fair value of cash flow
hedges¥26,329¥(16,254)$(115)¥(45,340)¥15,478$110(45,340)

15,478110

4,636(1,866)(13)¥(40,703)¥13,612$97$126

Exchange differences on translation of foreign operations
Amount arising during the year
Reclassification adjustments
Pre-tax effects
Tax effects
Exchange differences on translation of foreign operations
Effective portion of the change in the fair value of cash flow hedges

Net change in financial assets measured at fair value through othercomprehensive income
Amount arising during the year
Pre-tax effects
Tax effects
Net change in financial assets measured at fair value throughother comprehensive income
Remeasurements of defined benefit plans¥6,984¥17,745

Pre-tax effects

6,984

17,745126

Tax effects(1,591)(5,552)(39)

Remeasurements of defined benefit plans¥5,393¥12,192

$87

¥185

¥330

$2

¥185

¥330

$2

Amount arising during the year

Share of other comprehensive income of investments accounted forusing the equity method
Amount arising during the year
Share of other comprehensive income of investments accounted
for using the equity method

69

Dentsu Group Integrated Report 2024

32. EARNINGS (LOSS) PER SHARE(1) Basic earnings (loss) per share and diluted earnings (loss) per share(Yen)(U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Basic earnings (loss) per share¥223.33(¥40.52)($0.29)Diluted earnings (loss) per share¥221.96(¥40.52)($0.29)(2) Basis of calculating basic earnings (loss) per share and diluted earnings (loss) per share(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Profit (loss) for the year used for calculation of basic earnings (loss)
per share and diluted earnings (loss) per share¥59,847¥(10,714)$(76)

Amounts not attributable to ordinary equity holders of the parent

–

–

–

Profit (loss) for the year used for calculation of basic earnings (loss)
per share¥59,847(¥10,714)

$(76)

(1)

–

–

¥59,846¥(10,714)$(76)

Weighted average number of ordinary shares outstanding used
for the calculation of basic earnings (loss) per share (Thousandsof shares)

267,974

264,401

Effect of dilutive potential ordinary shares (Thousands of shares)

Performance-based Stock
Compensation Plan
1,618
Restricted Stock
Compensation Plan
34–

269,627

264,401–

Performance-based
Stock Compensation
Plan
81
Restricted Stock
Compensation Plan
33

Profit (loss) for the year attributable to owners of the parent

Adjustment
Share options issued by subsidiaries and associates
Profit (loss) for the year used for calculation of diluted earnings(loss) per share
Weighted average number of ordinary shares outstanding used
for the calculation of basic earnings (loss) per share and diluted
earnings (loss) per share

Weighted average number of ordinary shares outstandingused for the calculation of diluted earnings (loss) per share(Thousands of shares)

Financial instruments not included in calculation of diluted loss forthe increase of antidilution effects (Thousands of shares)

33. Significant non-cash transactions
During the year ended December 31, 2022, the Group commenced the lease of an office building in New York, the U.S. For details, please see“16. LEASES (1) Right-of-use assets included in the carrying amount of fixed assets.”
There were no significant non-cash transactions during the fiscal year ended December 31, 2023.

70

Dentsu Group Integrated Report 2024

Financial Report 2024

34. SHARE-BASED PAYMENTS(1) Performance-based stock compensation plan of the Company, Dentsu Inc., Corporate One Inc. and Dentsu Digital Inc.
The Company, Dentsu Inc., Dentsu corporate one Inc., and Dentsu Digital Inc. have introduced a performance-based stock compensation plan(hereinafter referred to as the “Plan”) for executive officers (including directors and executive officers; the same applies hereinafter).
The Plan provides executive officers of the Company, Dentsu Inc., Dentsu Corporate One Inc., and Dentsu Digital Inc. with a number ofpoints calculated in accordance with the formula specified in the officers’ share benefit rules established by the Compensation Committee (orthe Board of Directors, prior to the Company’s transition to a company with three committees) in consideration of the execution of duties in eachfiscal year in office. The number will be determined according to the following indicators during the three consecutive fiscal years starting fromthe fiscal year to which the units were awarded.
For 2021, 2022 and 2023 grants, the Group uses a combination of the total shareholder return (TSR) and the consolidated adjusted
operating income of the Group as indicators for calculation, as follows.
The details of the indicators for 2021, 2022 and 2023 grants are as follows.
Performance Indicator

Total shareholder return (TSR)

Composition (*1)

Benchmark IndicatorTokyo Stock Price Index (TOPIX)

2021

2022

2023

30%

30%

20%

Average total shareholder return (TSR) among peer group (*2)

20%

20%

30%

Compound annual growth rate (CAGR)

50%

50%

50%

Consolidated underlying operating profit of the Group*1 The ratios represent the percentage constituting performance-based stock compensation (medium- to long-term bonus) on the assumption that each performanceindicator is identical to their benchmark indicators.
*2 Six companies comprising WPP plc, Omnicom Group Inc., Publicis Groupe S.A., THE INTERPUBLIC GROUP OF COMPANIES INC., Accenture plc, and Hakuhodo
DY Holdings Inc. were selected as peer competitors of the Group.

The Company’s shares will be paid out for the number of shares calculated based on 50% of the vested units, and cash equivalent for the market
value of the number of shares calculated based on the remaining 50% of the vested units, using the closing price per share on the Tokyo Stock
Exchange on the day of the calculation (or the closing price on the day immediately before if there are no closing price). The former is accounted
for as an equity-settled share-based payment, and the latter is accounted for as an cash-settled share-based payment.
Executive officers receive benefits of the Company’s shares, etc., in principle, after three consecutive fiscal years has elapsed.
Regarding this Plan, the costs recognized for the equity-settled share-based payment plan and cash-settled share-based payment plan
were ¥439 million and ¥562 million for the year ended December 31, 2022, and ¥553 million ($4 million) and ¥(1,129 million) ($(8 million)) for theyear ended December 31, 2023, respectively.
Regarding the cash-settled share-based payment plan, The liability balance as of December 31, 2022 was ¥1,556 million. The liability
balance as of December 31, 2023 was ¥188 million ($1 million).
An overview of the equity-settled share-based payment plan is as follows:
FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

Number of rights(Unit)

Number of rights(Unit)

Balance at the beginning of the year

303,974

326,348

Granted92,249118,135

Exercised

69,875

115,081

Forfeitured
Balance at the end of the year
Exercisable at the end of the year––

326,348

329,402––(Note) 1. There is no exercise price in the Plan.
2. The weighted-average remaining term of this plan is 1.1 years and 1.2 years for the years ended December 31, 2022 and 2023, respectively.

71

Dentsu Group Integrated Report 2024

The fair value for units granted during the years ended December 31, 2022 and 2023 is ¥4,769 and ¥4,683 ($33) per unit, respectively. The fairvalue is measured by calculating the market value of the Company’s shares using the valuation method and key inputs, as described below, andadjusting this based on the performance indicators during the business performance evaluation period.

Valuation method

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

Monte Carlosimulation model

Monte Carlosimulation model¥4,525 ($32)

Key inputs and assumptions:
Measurement date share price¥4,910

Expected volatility (Note)

42.00%

30.7%

Option life

3.2 years

3.2 years

Dividend yield

2.60%

3.50%

Risk-free interest rate

0.00%

-0.10%(Note) Volatility of the stock price is calculated based on the past performance of the share price depending on the period until maturity.

An overview of the cash-settled stock compensation plan is as follows:
FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

Number of rights(Unit)

Number of rights(Unit)

Balance at the beginning of the year

303,974

326,348

Granted92,249118,135

Exercised

69,875

115,081

Forfeitured
Balance at the end of the year
Exercisable at the end of the year––

326,348

329,402––(Note) 1. There is no exercise price in the plan.
2. The weighted-average remaining term of this plan is 1.1 years and 1.2 years for the years ended December 31, 2022 and 2023, respectively.

The fair value for units granted during the year ended December 31, 2022 and 2023 is ¥3,793 and ¥535 ($4) per unit, respectively.
The fair value for unit is determined by calculating the market value of the Company’s shares based on the following evaluation method and
key inputs, and adjusting this based on the indicators during the performance evaluation period.
FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

Monte Carlosimulation model

Monte Carlosimulation model

Measurement date share price¥4,145¥3,618 ($26)

Expected volatility (Note)

29.2%

26.6%

2.2 years

2.2 years

Valuation method

Key inputs and assumptions:

Option life
Dividend yield

3.4%

3.8%

Risk-free interest rate

0.0%

0.0%

(Note) Volatility of the stock price is calculated based on the performance of the share price for the most recent period depending on the period to maturity.

72

Dentsu Group Integrated Report 2024

Financial Report 2024

(2) Performance-based stock compensation plan for senior executives of foreign subsidiaries
The Company introduced a performance-based stock compensation plan (the ”Plan”) for senior executives of foreign subsidiaries.
Under the Plan, senior executives of foreign subsidiaries are granted a number of units calculated in accordance with the calculation
formula prescribed by the Company as compensation for the performance of their duties during each fiscal year while in office. The numberof units is finalized depending on total shareholder return (TSR) and consolidated underlying operating profit of the Group during a businessperformance evaluation period, which is three consecutive fiscal years, the first fiscal year of which is the fiscal year in which the units are granted.
The details of the indicators for FY2021, FY2022, and FY2023 grants are as follows.
Performance Indicator

Total shareholder return (TSR)
Consolidated underlying operating profit of the Group

Composition (*1)

Benchmark IndicatorTokyo Stock Price Index (TOPIX)

2021

2022

2023

30%

30%

20%

Average total shareholder return (TSR) among peer group (*2)

20%

20%

30%

Compound annual growth rate (CAGR)

50%

50%

50%

*1 The ratios represent the percentage constituting performance-based stock compensation (medium- to long-term bonus) on the assumption that each performanceindicator is identical to their benchmark indicators.
*2 Six companies comprising WPP plc, Omnicom Group Inc., Publicis Groupe S.A., INTERPUBLIC GROUP OF COMPANIES, INC., Accenture plc, and Hakuhodo DY
Holdings Inc. were selected as peer competitors of the Group.

The Plan is an equity-settled share-based payment plan under which a number of common shares of the Company calculated primarily based on
the number of finalized units are granted. In principle, senior executives of foreign subsidiaries are granted common shares of the Company aftera lapse of three consecutive fiscal years, the first fiscal year of which is the fiscal year in which the units are granted. With respect to the equity
settlement stock compensation plan of the Plan, expenses recognized in the year ended December 31, 2022 were ¥1,486 million and expenses
recognized in the year ended December 31, 2022 were ¥(581million) ($(4 million)).
An overview of the equity-settled share-based payment plan is as follows:
FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

Number of rights(Unit)

Number of rights(Unit)

Balance at the beginning of the year

1,140,314

1,879,857

Granted

1,078,859

1,077,998

Forfeitured
Balance at the end of the year
Exercisable at the end of the year

339,316

919,512

1,879,857

2,038,343

262,961–(Note) 1. There is no exercise price in the Plan.
2. The grant date is March 25, 2022 and March 23, 2023.
3. The weighted average remaining maturity of the system is 1.6 years and 1.3 years as of December 31, 2022 and 2023, respectively.
4.	On March 25, 2024, the Group paid monetary amounts corresponding to the number of vested units for compensation vested on February 29, 2024, basedon a resolution adopted at the meeting of the Compensation Committee held on February 13, 2024.

The fair value of units is ¥3,492 per unit granted in the year ended December 31, 2022 and ¥3,337 ($24) per unit granted in the year ended
December 31, 2023. The fair value of a unit is measured by calculating the market value of the Company’s shares based on the following
valuation techniques and basic figures, and adjusting it according to the indicators of the performance evaluation period.
FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

Monte Carlosimulation model

Monte Carlosimulation model

Measurement date share price¥4,910¥4,525 ($32)

Expected volatility (Note)

42.0%

30.7%

3.2 years

3.2 years

Valuation method

Key inputs and assumptions:

Option life
Dividend yieldRisk-free interest rate

2.6%

3.5%

0%

-0.10%(Note) Volatility of the stock price is calculated based on the performance of the share price for the most recent period depending on the period to maturity.

73

Dentsu Group Integrated Report 2024

(3) Restricted stock compensation plan for the key members of Merkle’s management teamStarting from the year ended December 31, 2020, for the purpose of retaining the key members of Merkle’s management team, the Company
adopts an equity-settled restricted stock compensation plan, under which the Company’s shares are to be granted to 25 key members of
Merkle’s management team. Under this plan, a contractual transfer restriction (the transfer restriction period shall be, in principle, the period
until December 31, 2023) was set on the Company’s shares subject to the grant, and if certain events occurred including the resignation of the
key members of Merkle’s management team from the management positions during the transfer restriction period without a justifiable reason,
the Company will acquire the shares granted without consideration.
During the year ended December 31, 2022 and 2023, ¥64 million and ¥569 million ($4 million) was recognized as expenses related to this plan.
The following table provides a summary of the Restricted stock compensation plan.
FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

Number of rights

Number of rights

2,304,100

2,008,975

Balance at the beginning of the year––

295,125–

GrantedForfeitured
Balance at the end of the year
Exercisable at the end of the year

2,008,975

2,008,975

870,000

2,008,975(Note) 1. The grant date is April 17, 2020.
2. The fair value on the date of grant was determined using the share price of ¥2,072 ($15) on the date of grant.

35. FINANCIAL INSTRUMENTS(1) Capital management
The Group’s basic policy for capital management aims to enhance capital efficiency by the long-term improvement of its value through businessgrowth, while maintaining a sound financial structure.
The balance of total equity attributable to owners of the parent and underlying ROE (ratio of underlying profit for the year to total equity
attributable to owners of the parent) that are Indicators for the capital management include are as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)¥880,267¥841,651$5,976

15.1

10.4

10.4

Total equity attributable to owners of the parent
Underlying ROE (%)(Note)	The underlying profit for the year (attributable to owners of the parent), the numerator of underlying ROE, is a KPI used to measure recurring profit attributableto owners of the parent which is calculated as profit for the year (attributable to owners of the parent) adjusted for adjustment items related to operating profit,
revaluation of contingent consideration and put option liabilities, related tax effects, profit or loss attributable to non-controlling interests, and other one-off
items. Reconciliation from profit for the year (attributable to owners of the parent) to underlying profit for the year (attributable to owners of the parent)
is stated below. Adjustment items for the fiscal year ended December 31, 2023 include an adjustment for gain from the termination of interest rate swap
agreements ¥(7,782) million ($(55 million)), included in “Other”.
(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥59,847¥(10,714)($76)

Adjustment items related to operating profit

85,572

118,202

839

Revaluation of contingent consideration and put option liabilities

12,1632,282

16

Revaluation gain on step acquisition(5,467)

(142)

(1)

Profit for the year (attributable to owners of the parent)(Adjustment items)

551(10,021)(71)

Tax expenses related to the above items(19,926)(8,994)(64)

Profit attributable to non-controlling interest related to the above
items(2,702)

(772)

(5)

¥130,037¥89,839$638

OthersUnderlying profit for the year (attributable to owners of parent)

74

Dentsu Group Integrated Report 2024

Financial Report 2024

(2) Basic policy on risk management associated with financial instruments
The Group is exposed to financial risks in the course of its business activities; and it manages risks based on a specific policy in order to avoid or
reduce these risks.
Derivative transactions are conducted within the purpose of avoiding or reducing the above risks according to internal management policy.
(3) Credit risk
A. Credit risk management
Financial assets measured at amortized cost, including trade receivables, such as notes and accounts receivable, are exposed to customers’
credit risk. The Group aims to reduce these risks based on credit management rules and guidelines.
The Group conducts review of new counterparties and credit management based on credit management rules and guidelines. Based on
accounting rules and guidelines, the relevant controlling departments in each business unit, together with the accounting department, manage
due dates and outstanding balances for each counterparty and regularly monitor the status of major counterparties to detect and reduce
doubtful receivables due to deteriorating financial conditions or other reasons in a timely manner.
Consolidated subsidiaries perform credit management and receivables management and have management systems in place that require
reporting and approval for certain significant transaction and events.
The Group does not have excess concentration of credit risk in specific counterparties.
B. Maximum exposure to credit risk
With the exception of guarantee obligations, maximum exposure to the Group’s credit risk is as follows.
Maximum exposure to credit risk associated with guarantee obligations is the balance of the contingent liabilities described in “37.
CONTINGENT LIABILITIES.”75

Dentsu Group Integrated Report 2024

C. Analysis of trade receivables by due date(Millions of Yen)FY2022 (As of December 31, 2022)
Financial assets whose allowance for doubtful accounts is measured at an
amount equal to lifetime expected credit losses

Financial assets whose
allowance for doubtful
accounts is measured
at an amount equal to
the 12-month expectedcredit loss

Financial assets whose
credit risk has increased
significantly since initialrecognition

Financial assets that are
credit impaired

Receivables andcontract assets arisingfrom contracts withcustomers

Total¥1,437,883

None in arrears¥57,603––¥1,380,279

Within 30 days

–

–

–

72,432

72,432

Over 30 days, within 90 days

–

–

–

37,20437,204

Over 90 days
Total

–

–

2,489

28,881

31,370¥57,603–¥2,489¥1,518,798¥1,578,891(Millions of Yen)FY2023 (As of December 31, 2023)
Financial assets whose allowance for doubtful accounts is measured at an
amount equal to lifetime expected credit losses

Financial assets whose
allowance for doubtful
accounts is measured
at an amount equal to
the 12-month expectedcredit loss

Financial assets whose
credit risk has increased
significantly since initialrecognition

Financial assets that are
credit impaired

Receivables andcontract assets arisingfrom contracts withcustomers

Total

None in arrears¥45,509––¥1,389,335¥1,434,844

Within 30 days

–

–

–

73,41673,416

Over 30 days, within 90 days

–

–

–

33,83433,834

Over 90 days
Total

–

–

2,548

26,084

28,633¥45,509–¥2,548¥1,522,671¥1,570,729(Millions of U.S. Dollars)

FY2023 (As of December 31, 2023)
Financial assets whose allowance for doubtful accounts is measured at an
amount equal to lifetime expected credit losses

Financial assets whose
allowance for doubtful
accounts is measured
at an amount equal to
the 12-month expectedcredit loss

Financial assets whose
credit risk has increased
significantly since initialrecognition

Financial assets that are
credit impaired

Receivables andcontract assets arisingfrom contracts withcustomers

Total

None in arrears

$323

–

–

$9,865$10,188

Within 30 days

–

–

–

521

521

Over 60 days, within 90 days

–

–

–

240

240

Over 90 days
Total

–

–

$18

185

203

$323

–

$18

$10,811$11,153

D. Analysis of changes in allowance for doubtful accounts
The Group establishes an allowance for doubtful accounts based on a review of the collectability of trade and other receivables considering thecredit standing of the counterparties. Changes in the allowance for doubtful accounts are as follows:(Millions of Yen)FY2022 (Year ended December 31, 2022)
Lifetime expected credit losses

Balance at the beginning of theyear

12-month expectedcredit losses

Financial assets whose
credit risk has increased
significantly since initialrecognition

Financial assets that are
credit impaired

Receivables andcontract assets arisingfrom contracts withcustomers¥235–¥2,849¥15,777

Total¥18,861

Addition

195

–

538

1,665

2,400

Decrease (intended use)

(19)

–

(37)

(3,107)(3,164)

Decrease (reversal)

(7)

–

(849)

(110)

(967)

Other

64

–

(12)

(1,794)(1,742)¥467–¥2,489¥12,430¥15,387

Balance at the end of the year76

Dentsu Group Integrated Report 2024

Financial Report 2024

(Millions of Yen)FY2023 (Year ended December 31, 2023)
Lifetime expected credit losses
12-month expectedcredit losses

Financial assets whose
credit risk has increased
significantly since initialrecognition

Financial assets thatare credit impaired

Receivables andcontract assets arisingfrom contracts withcustomers¥467–¥2,489¥12,430¥15,387

Addition

475

–

308

3,358

4,141

Decrease (intended use)

(71)

–

–

(772)

(843)

Decrease (reversal)

(204)

–

(598)

(315)

(1,117)

Other

(324)

–

348

1,109

1,133

Balance at the end of the year

¥342

–

¥2,548¥15,811¥18,702

Balance at the beginning of the
year

Total

(Millions of U.S. Dollars)
FY2023 (Year ended December 31, 2023)
Lifetime expected credit losses

Balance at the beginning of theyear

12-month expectedcredit losses

Financial assets whose
credit risk has increased
significantly since initialrecognition

Financial assets thatare credit impaired

Receivables andcontract assets arisingfrom contracts withcustomers

$3

–

$18

$88

Total

$109

Addition

3

–

2

24

29

Decrease (intended use)

(1)

–

–

(5)

(6)

Decrease (reversal)

(1)

–

(4)

(2)

(8)

Other

(2)

–

$2

8

8

Balance at the end of the year

$2

–

$18

$112

$133

The following table shows the contractual outstanding balance of financial assets that were directly amortized by the Group but subject toenforcement activities:

Contractual outstanding balance(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

¥354

¥311

$2

(4) Liquidity risk
A. Liquidity risk management
The Group manages liquidity risk by having the treasury division establish and update a finance plan based on information collected from eachdivision and also by maintaining liquidity based on cash flow status.
The Group raises working capital from internal reserves, loans from financial institutions, corporate bonds, commercial paper, receivables
securitization, etc. Since the receivables securitization transaction is a non-recourse agreement, securitized receivables were derecognized.
In order to take all possible measures to cope with rapid changes in the external environment, we continue to temporarily establish
additional bank credit lines with financial institutions.
B. Balance of financial liability (including derivative financial instruments) by maturity
Balance of financial liability (including derivative financial instruments) by maturity as of December 31, 2022 and 2023 is as follows:77

Dentsu Group Integrated Report 2024

FY2022: As of December 31, 2022
(Millions of Yen)
Carrying
amountContractual
cash flow

Due within
1 yearDue after 1
year through2 years

Due after 2
years through3 years

Due after 3
years through4 years

Due after 4
years through5 years

Due after
5 years¥1,532,591¥1,532,591¥1,532,591

–

–

–

–

–

38,42538,425

32,113

6,311

–

–

–

–
3,333

Non-derivative financial liabilities
Trade and other payables
Contingent consideration on
acquisition and others
Put option liabilities

21,493

21,493

13,707

3,354

–

1,097

–

Borrowings

332,770

356,251

73,303150,889

51,92080,137

–

–

Bonds

199,660

203,446

35,622590

70,536432

10,41885,847

Lease obligations
Subtotal
Derivative liabilities
Total

224,161

263,368

39,35833,35928,55525,84924,079112,167

2,349,101

2,415,577

1,726,696

194,504

151,012

107,516

34,497201,349

5,828

5,828

2,057

83

3,188

21

478

–

¥2,354,930¥2,421,405¥1,728,753¥194,588¥154,201¥107,537¥34,975¥201,349

Due after 2
years through3 years

Due after 3
years through4 years

Due after 4
years through5 years

Due after
5 years

FY2023: As of December 31, 2023
(Millions of Yen)
Carrying
amountContractual
cash flow

Due within
1 yearDue after 1
year through2 years¥1,527,612¥1,527,612¥1,527,612

–

–

–

–

–

20,18520,185

13,799

5,886

499

–

–

–

Non-derivative financial liabilities
Trade and other payables
Contingent consideration on
acquisition and others
Put option liabilities

14,35914,35912,318

–

–

–

–

2,040

Borrowings

329,698

347,580

46,682

58,95367,866

71,59956,00846,470

Bonds

164,747

167,824590

70,536432

10,41825,38260,465

Lease obligations

219,018

255,71141,49635,05030,54926,981

23,08398,5492,275,621

2,333,273

1,642,500

170,426

99,346108,999

104,474

207,526

31,25031,250977

18,485

2,730

3,695

–

5,360

¥2,306,871¥2,364,523¥1,643,477¥188,912¥102,077¥112,695¥104,474¥212,887

Due after 2
years through3 years

Due after 3
years through4 years

Due after 4
years through5 years

Due after
5 years

Subtotal
Derivative liabilities
Total

FY2023: As of December 31, 2023
(Millions of U.S. Dollars)
Carrying
amountContractual
cash flow

Due within
1 yearDue after 1
year through2 years$10,846$10,846$10,846

–

–

–

–

–

143

143

98

42

4

–

–

–

Non-derivative financial liabilities
Trade and other payables
Contingent consideration on
acquisition and others

102

102

87

–

–

–

–

14

Borrowings

2,341

2,468

331

419

482

508

398

330

Bonds

1,170

1,192

4

501

3

74

180

429

Lease obligations

1,555

1,816

295

249

217

192

164

700

16,157

16,567

11,662

1,210

705

774

742

1,473

Put option liabilities

Subtotal
Derivative liabilities
Total

222

222

7

131

19

26

–

38

$16,379$16,789$11,669$1,341

$725

$800

$742

$1,512

C. Undrawn committed facilities
Undrawn committed facilities amounted to ¥603,453 million and ¥621,901 million ($4,416 million) as of December 31, 2022 and 2023, respectively.
The undrawn committed facilities include commitment lines of credit, overdraft lines of credit and commercial paper facilities.

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Financial Report 2024

(5) Foreign currency risk
A. Foreign currency risk management
Monetary receivables and payables denominated in foreign currencies are exposed to foreign exchange fluctuation risks. The Group uses
forward foreign exchange contracts to hedge its foreign exchange fluctuation risks identified by each currency and by each month.
In addition, with respect to those that are important among transactions denominated in foreign currencies exceeding certain amounts andforeign exchange fluctuation risks, forward foreign exchange contracts and borrowings and others are used to hedge them in accordance withinternal management rules.
B. Foreign currency sensitivity analysis
With respect to financial instruments held by the Group, in cases where the functional currency (Yen) increases by 10% in value against the U.S.
Dollar or Euro assuming all other variables remain unchanged, the effect on profit after tax as of December 31, 2022 and 2023 is as follows:
The impact from the translation of financial instruments denominated in its functional currencies, as well as assets and liabilities of foreign
operations into yen is not included.
(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)¥(229)¥(666)

$(5)

(40)

(26)

0

U.S. Dollars
Euros(6) Interest rate risk
A. Interest rate risk management
For certain portion of the Group’s borrowings, interest expenses are fixed using derivatives transactions (interest rate swap contracts, etc.) to
avoid or reduce interest rate fluctuation risks.
B. Interest rate sensitivity analysis
Regarding the financial instruments held by the Group, the table below presents the effect of 300bps increase in interest rates on profit after tax
in the Consolidated Statement of Income. The analysis includes the financial instruments (borrowings) that is subject to exchange rate fluctuation
and assumes that all other factors, including exchange rate, are unchanged.
(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)¥(523)¥(1,942)$(14)

Profit after tax
C. Interbank Offered Rate (IBOR) reform

The Group’s hedging transactions are impacted by the London Interbank Offered Rate (LIBOR), which is currently undergoing the IBOR reform.
GBP LIBOR and JPY LIBOR ceased on December 31, 2021. The Group continues hedge accounting by amending the contract terms ofhedged items and hedging instruments that had referenced them and starting to reference SONIA (Sterling Overnight Index Average) instead.
While USD LIBOR is undergoing reform, the Group continues to have exposures of interest rate benchmark hedges that reference USD LIBOR.
The nominal transaction value of hedging instruments referencing USD LIBOR that will mature after the end of 2023 is ¥14,084 million ($100
million) as of December 31, 2023. These hedging instruments are designated as a means to hedge specific cash flows of borrowings arranged atvariable rates indexed to LIBOR.
The Group will continue to apply the amended IAS 39 until the uncertainties associated with the IBOR reform cease. The Group assumes
that such uncertainties will remain until alternative benchmark rates are determined and cash flows based on such alternative benchmark rates
and related spread adjustments are fixed.
For hedging instruments and hedged items referencing USD LIBOR, the Group will take actions to ensure a smooth transition to possible
alternative benchmark rates such as Secured Overnight Financing Rate (SOFR).

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(7) Hedge accounting
The notional amounts and average prices of major hedging instruments were as follows:
FY2022(As of December 31, 2022)
Notional Amount andAverage PriceContent

Interest rate risk

Interest rate swap

Within one year

Over one year
Within five years

Over five years

Notional Amount (Millions
of Yen)

2,000

–

–

Average fixed rate

0.83%

–

–

Notional Amount (Millions
of U.S. Dollars)

–

300

–

Average fixed rate

–

2.60%

–

Notional Amount (Millionsof sterling pound)

–

650

–

Average fixed rate

–

1.68%

–

120

335

86

106.93

99.06

96.20

2

8

–

156.87148.24–1

4

7116.23115.49126.62

Notional Amount (Millions
of U.S. Dollars)

–

31

–

Average exchange rate
(Yen/USD)–

120.65–

Notional Amount (Millions
of Yen)44,04496,153

88,341

Average exchange rate
(Yen/GBP)

151.71142.96130.20

Notional Amount (Millions
of U.S. Dollars)
Average exchange rate
(Yen/USD)
Cash flow hedge

Foreign exchange
contracts (buy)Notional Amount (Millionsof sterling pound)
Average exchange rate
(Yen/GBP)
Notional Amount (Millions
of EUR)

Foreign exchange
risk

Average exchange rate
(Yen/EUR)
Foreign exchange
contracts (sale)

Cross currency
swaps (Note)80

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FY2023(As of December 31, 2022)
Notional Amount andAverage PriceContent

Notional Amount (Millions
of U.S. Dollars)Interest rate risk

Interest rate swap

Average fixed rate

Cross currency
swaps (Note)

100

–
–

–

250

–

Average fixed rate

–

2.10%

–

76

336

8

101.87

97.99

83.55

2

6

–

152.40146.58–7

4

1136.56114.82113.6749––

128.32––

Notional Amount (Millions
of Yen)–95,65389,363

Average exchange rate
(Yen/GBP)–

144.27132.82

Notional Amount (Millionsof sterling pound)
Average exchange rate
(Yen/GBP)

Average exchange rate
(Yen/EUR)
Foreign exchange
contracts (sale)

200

3.13%

Notional Amount (Millions
of EUR)

Foreign exchangeriskOver five years

2.33%

Average exchange rate
(Yen/USD)

Cash flow hedge

Over one year
Within five years

Notional Amount (Millionsof sterling pound)
Notional Amount (Millions
of U.S. Dollars)

Foreign exchange
contracts (buy)Within one year

Notional Amount (Millions
of U.S. Dollars)
Average exchange rate
(Yen/USD)

Note: Cash flow hedges are applied to foreign currency items between consolidated companies while offsetting hedged items under the Consolidated Statement of
Financial Position.

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The carrying amounts of the hedging instruments of the Company and certain consolidated subsidiaries are as follows. The amount of
ineffectiveness of hedges recognized in profit or loss is not material for the years ended December 31, 2022 and 2023.
(Millions of Yen)FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

Carrying Amount

Carrying Amount

AssetsLiabilities

Assets(Millions of U.S. Dollars)
FY2023(As of December 31, 2023)

Item in theConsolidated
Statements ofFinancial Position

Liabilities

Carrying Amount
AssetsLiabilities

Cash flow hedge
Interest rate risk

¥12,256¥(1)¥2,856–(Note)$20–

Foreign exchange risk

13,699(5,404)

12,715(27,102)(Note)

90(192)

Total-cash flow hedges

25,955(5,405)

15,571(27,102)

111

(192)

Total financial instruments for which
hedge accounting is applied¥25,955¥(5,405)¥15,571¥(27,102)$111$(192)(Note) Included in “Other financial assets (current),” “Other financial assets (non-current),” “Other financial liabilities (current)” and “Other financial liabilities (non-current).”

The amount of cash flow hedges of the Company and certain consolidated subsidiaries recorded in other comprehensive income (before tax
effect) in the Consolidated Statements of Comprehensive Income for the year is as follows:(Millions of Yen)FY2022: Year ended December 31, 2022
Amount incurred

Reclassification adjustmentsfrom other comprehensive
income to non-financial
assets and others (Note)

Reclassification
adjustments from Item in the Consolidated
other comprehensive
Statement of Income
income to net income

Cash flow hedge
Interest rate risk

¥14,739–¥114

Finance expenses

Foreign exchange risk

22,302(5,367)

1,543

Finance income

Total-cash flow hedges¥37,042¥(5,367)¥1,658(Millions of Yen)FY2023: Year ended December 31, 2023
Amount incurred

Reclassification adjustmentsfrom other comprehensive
income to non-financial
assets and others (Note)

Reclassification
adjustments from Item in the Consolidated
other comprehensive
Statement of Income
income to net income

Cash flow hedge
Interest rate risk¥(14,419)––

Finance expenses

Foreign exchange risk

(23,009)(4,335)23,070Finance income

Total-cash flow hedges¥(37,429)¥(4,335)¥23,070(Millions of U.S. Dollars)

FY2023: Year ended December 31, 2023
Amount incurred

Reclassification adjustmentsfrom other comprehensive
income to non-financial
assets and others (Note)

Reclassification
adjustments from Item in the Consolidated
other comprehensive
Statement of Income
income to net income

Cash flow hedge
Interest rate risk$(102)––

Finance expenses

Foreign exchange risk

(163)

(31)

164

Finance income

Total-cash flow hedges$(266)

$(31)

$164

(Note) As stated in “3. MATERIAL ACCOUNTING POLICIES,” if a hedged item results in the recognition of non-financial assets or non-financial liabilities, the amounts
recognized as other components of equity will be reclassified through other comprehensive income to the initial carrying amount of the non-financial assets or
non-financial liabilities, in accordance with IAS 39.

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Financial Report 2024

The components of changes in the amounts recorded in other components of equity in the Consolidated Statements of Financial Position for
cash flow hedges during the year are as follows:(Millions of Yen)FY2022: Year ended December 31, 2022
Cash flow hedge
Interest rate risk

Foreign exchange risk

Balance at the beginning of the year

¥3,777¥8,421

Arising during the year

12,216

16,526

Reclassification adjustments to net income

84

1,202

–

(3,703)¥16,078¥22,446

Reclassification adjustments for non-financial assets and others
Balance at the end of the year

(Millions of Yen)FY2023: Year ended December 31, 2023
Cash flow hedge
Interest rate risk

Foreign exchange risk

Balance at the beginning of the year

¥16,078¥22,446

Arising during the year

(14,063)(16,531)

Reclassification adjustments to net income–

17,340Reclassification adjustments for non-financial assets and others–(3,001)¥2,015¥20,253

Balance at the end of the year

(Millions of U.S. Dollars)
FY2023: Year ended December 31, 2023
Cash flow hedge
Interest rate risk

Foreign exchange risk

Balance at the beginning of the year

$114

$159

Arising during the year

(100)

(117)

Reclassification adjustments to net income–

123

Reclassification adjustments for non-financial assets and others

–

(21)

$14

$144

Balance at the end of the year(8) The carrying amount and fair value of financial instruments.
The breakdown of the carrying amount and fair value of financial instruments as of December 31, 2022 and 2023 is as follows:
The fair value of financial assets and financial liabilities measured at amortized cost other than long-term borrowings and bonds
approximates their carrying amount.
FY2022(As of December 31, 2022)(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Carrying amount

Fair value

Carrying amount

Fair value

Carrying amountLong-term borrowings¥304,016¥299,380¥290,498¥294,318$2,063

Fair value$2,090

Bonds¥199,660¥197,535¥164,747¥163,735$1,170$1,163(Note) Current portion that is scheduled for repayment within one year is included.

The fair value of long-term borrowings is determined by discounting the total of the principal and interest by the interest rate assumed in a casewhere the same loan is newly made.
The fair value hierarchy of long-term borrowings is categorized as Level 2.
The fair value of bonds is determined based on quoted market prices. The fair value hierarchy is categorized as Level 2.

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(9) Fair value hierarchy of financial instruments
Financial instruments measured at fair value on a recurring basis after initial recognition are categorized into the three levels of the fair value
hierarchy according to observability and significance of input used in measurements.
The fair value hierarchy is defined as follows:
Level 1: Fair value measured at the quoted price in the active market
Level 2: Fair value that is measured using the observable price other than categorized in Level 1 directly or indirectly
Level 3: Fair value that is measured based on unobservable inputs
When multiple inputs are used to measure fair value, fair value levels are determined based on the lowest level input that is significant to theentire fair value measurement.
Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of each quarter.
There were no transfers between Level 1 and Level 2 for the years ended December 31, 2022 and 2023. The followings table includes put
option liabilities.
FY2022: As of December 31, 2022
(Millions of Yen)
Level 1

Level 2

Level 3Total

Derivative assets–

Equity securities

53,973¥26,679–¥26,679–

39,606

93,580488

3,395

31,42735,311¥54,462¥30,074¥71,034¥155,571

Derivative liabilities–¥5,828–¥5,828

Put option liabilities––

21,493

21,493Financial assets

Other
Total
Financial liabilities

Other (mainly contingent consideration)––

38,42538,425–¥5,828¥59,918¥65,746

Level 1

Level 2

Level 3Total

Derivative assets–¥18,614–¥18,614

Equity securities

59,323–23,72983,053492

6,510

20,48927,491¥59,815¥25,124¥44,219¥129,159

Derivative liabilities–¥31,250–¥31,250

Put option liabilities––

14,35914,359Other (mainly contingent consideration)––

20,18520,185–¥31,250¥34,544¥65,794

Total

FY2023: As of December 31, 2023
(Millions of Yen)

Financial assets

Other
Total
Financial liabilities

Total

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Financial Report 2024

FY2023: As of December 31, 2023
(Millions of U.S. Dollars)
Level 1

Level 2

Level 3Total

Derivative assets–

Equity securities

421

$132

–

$132

–

168

590

3

46

145

195

$425

$178

$314

$917

Derivative liabilities

–

$222

–

$222

Put option liabilities

–

–

102

102

Other (mainly contingent consideration)

–

–

143

143

–

$222

$245

$467

Financial assets

Other
Total
Financial liabilities

Total

The fair values of interest rate swap contracts and foreign exchange contracts included in derivative assets and derivative liabilities are
categorized within Level 2 as they are valuated using price estimates obtained from financial institutions or observable market data.
The fair values of stocks included in equity securities and other (financial assets) for which active markets exist are categorized within Level 1
as they are determined based on market prices.
For stocks in which active markets do not exist, the stocks whose fair value is measured using observable market data are categorized
within Level 2, while stocks measured based mainly on two income approaches (one using the DCF method by which the perpetual value iscalculated using the exit multiple method and the other using the perpetual value is calculated using the perpetual growth rate method) and themarket approach (the comparable companies analysis) using unobservable inputs are categorized within Level 3.
In the income approach (the DCF method by which the perpetual value is calculated using the exit multiple method), significant
unobservable inputs are mainly the level of future revenue and exit multiple (enterprise value/revenue), and discount rate. The fair value increases(decreases) as the level of future revenue increases (decreases); the fair value increases (decreases) as the exit multiple increases (decreases); thefair value decreases (increases) as the discount rate increases (decreases). The exit multiples (enterprise value/revenue) and discount rates used
for the years ended December 31, 2022 and December 31, 2023 were 2.6 and 30%, and 2.9 and 30%, respectively.
In the income approach (DCF method by which the perpetual value is calculated using the perpetual growth rate method), significant
unobservable inputs are mainly the discount rate. The fair value decreases (increases) as the discount rate increases (decreases). The discountrates used for the fiscal years ended December 31, 2022 and December 31, 2023 were 6.7% and 8.2%, respectively.
Significant unobservable inputs in the market approach (comparable company method or comparable transaction method) mainly include
valuation multiples such as enterprise value/revenue, enterprise value/operating profit. The fair value increases (decreases) as the valuation
multiples increase (decrease). Enterprise value/operating profit multiples ranging from 9.01 and 13.99 were used as valuation multiples in theyear ended December 31, 2022 and 2023, respectively.
The fair values, etc. and others of put option liabilities and other (financial liabilities) are categorized within Level 3 as they are valuatedbased on the discounted cash flow method using unobservable inputs. Significant unobservable inputs are level of future profitability anddiscount rate. The fair values, etc. increases (decreases) as level of profitability increases (decreases).
If the profit level improves or deteriorates by 100 bps, the fair values, etc, will increase by ¥111 million or decrease by ¥126 million as ofDecember 31, 2022, increase by ¥142 million ($1 million) or decrease by ¥141 million ($1 million) as of December 31, 2023, respectively. If the
discount rate increases or decreases by 100 bps, the fair values, etc, will decrease by ¥281 million or increase by ¥294 million as of December 31,
2022, decrease by ¥240 million ($2 million) or increase by ¥259 million ($2 million) as of December 31, 2023, respectively.
The fair values of assets and liabilities categorized within Level 3 are measured using asset and liability valuation methods determined by
the department in charge in accordance with fair value measurement valuation policies and procedures. Fair value measurement results areapproved by the appropriate personnel in charge.

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The schedule of financial instruments categorized within Level 3 is as follows:
FY2022(Year ended
December 31, 2022)

Financial assets(Millions of Yen)

(Millions of U.S. Dollars)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Balance at the beginning of the year

¥87,437¥71,034$504

Other comprehensive income (Note 1)(35,228)(16,900)(120)

Profit or loss (Note 2)

10,897(1,111)(8)

Purchases or acquisition

10,4384,964

35

Sales or settlements(1,422)(10,324)

(73)

Other

(1,088)(3,442)(24)

Balance at the end of the year

¥71,034¥44,219$314

Financial liabilities(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)$425

Balance at the beginning of the year

¥83,475¥59,918

Profit or loss (Note 2)

12,163

2,282

16

Purchases

6,253

15,465110(43,001)(46,528)

(330)

1,027

3,406

24

¥59,918¥34,544$245

Sales or settlements
Other
Balance at the end of the year

(Note 1) “Other comprehensive income” is associated with financial assets measured at fair value through other comprehensive income and included in “Net change
in financial assets measured at fair value through other comprehensive income.”(Note 2) “Profit or loss” is associated with financial assets and financial liabilities at fair value through profit or loss and included in finance income or expenses. Profit
or loss arising from financial instruments held at fiscal year end amounted to finance income of ¥13,120 million and finance expenses of ¥14,386 million forthe years ended December 31, 2022 and finance income of ¥3,338 million ($24 million) and finance expenses of ¥4,531 million ($32 million) for the years
ended December 31, 2023.

(10) Offsetting of financial assets and liabilities
The amounts of financial assets and liabilities as of December 31, 2022 and 2023, that are against the same counterparty and that are offset inaccordance with the criteria for offset, are as follows.
(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Cash and cash equivalents

Cash and cash equivalents

Cash and cash equivalents

Total recognized financial assets¥146,871¥103,964$738

The amount of financial assets and liabilities offset in accordancewith the criteria(127,761)(87,126)(619)

Net amount recorded in Consolidated Statement of Financial
Position¥19,110¥16,837$120(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Borrowings (current)

Borrowings (current)

Borrowings (current)

Total recognized financial liabilities¥127,761¥87,126$619

The amount of financial assets and liabilities offset in accordancewith the criteria(127,761)(87,126)

(619)

–

–

–

Net amount recorded in Consolidated Statement of Financial
Position

The amounts of financial assets and liabilities that are under enforceable master netting agreements or similar contracts, but are not offset as
they do not meet certain or all criteria of offsetting are not material.

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Financial Report 2024

36. RELATED PARTIES(1) Transactions with related parties
The Company and its consolidated subsidiaries purchase advertising-related services from associates and also provide advertising placement
and advertising-related services to them. Arm’s length prices are applied in transactions with associates.
The balance of receivables and payables to associates as of December 31, 2022 and 2023 are as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

Receivables¥23,062¥20,513$146

Payables¥8,351¥6,654$47

Transactions with associates for the year ended December 31, 2022 and 2023 are as follows:
Turnover and Cost of sales are shown in gross amount.
(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)

Turnover¥92,233¥82,540$586

Cost of sales

30,98921,983156

Selling, general and administrative expenses¥4,179¥4,172$30(2) Remuneration for the Group’s senior leaders
Remuneration for the Group’s senior leaders for each fiscal year is as follows:(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(Year ended
December 31, 2022)

FY2023(Year ended
December 31, 2023)

FY2023(Year ended
December 31, 2023)¥2,081¥1,022

$7

862

321

2

¥2,943¥1,344$10

Remuneration and bonuses
Stock compensation
Total(Note) Senior leaders are defined as the personnel with the direct and indirect authorities and responsibilities for planning the Group’s activities, directing these
activities, and controlling them.

(3) Subsidiaries and associates
The main subsidiaries of the Group are described in “Consolidated Subsidiaries.”
Compared to as of December 31 2022, the number of consolidated subsidiaries and equity-accounted investees decreased by 73 and4, respectively.

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37. CONTINGENT LIABILITIESThe contingent liabilities as of December 31, 2022 and 2023 are as follows:
Guarantees of loans and other liabilities(Millions of Yen)

(Millions of U.S. Dollars)

FY2022(As of December 31, 2022)

FY2023(As of December 31, 2023)

FY2023(As of December 31, 2023)

¥10

¥2

$0

Liabilities on guarantees resulting from a loan scheme for housing
funds for employees
Liabilities for guarantees of bank loans and others

6,843

9,083

64

Total

¥6,854¥9,085$65

The business that the Group companies execute over a wide range of areas may be subject to claims, surcharge payment etc. based oninvestigations, lawsuits, media audits, etc. from government agencies, clients, media companies, partner companies, etc., in both Japan andoverseas. As a result of our verification, including consultations with experts and others, we believe that even if obligations arise due to suchclaims, it would not have a significant impact on the financial position or operating results of the Group.
Contingent liabilities, etc. in India
The Group investigated certain matters related to transactions entered into by one of the Group’s Indian subsidiaries in detail with the assistanceof external legal and professional advisors, and reported the results to the appropriate regulatory authorities in India.
Related to the matters reported, the Group has received claims totaling INR5,333 million (¥9,047 million) from parties seeking payment forgoods and services which those parties allege had been provided to the subsidiary in question.
Based on legal advice received to date, the Group has rejected these claims. The Group contests the substance of the underlying
transactions and is of the view that no bona fide goods or services were actually provided. Consequently, the Group has not recorded a liability
in association with these claims. While the Group continues to investigate the matters with the support of its external legal and professional
advisors, it is vigorously defending its position with respect to the claims and continues to support the authorities with their enquiries.
The outcome of the legal proceedings and any action by the regulators remains uncertain.
Contingent liabilities, etc. relating to contingent consideration arising from the acquisition of a consolidated subsidiary
In relation to the contingent consideration arising from the acquisition of a consolidated subsidiary during the previous fiscal years, which was
conducted as part of efforts to expand its international business, the Group has been requested by the seller of the acquired company for the
additional payment. The claim is based on the seller’s assertion that the Group acted in a manner that had a negative impact on the performanceon which the contingent consideration was calculated.
The Group’s position was that actions were permitted under the purchase agreement, and it was planning to contest the sellers’ claim.
However, under the purchase agreement, since the parties must attempt in good faith to resolve the amounts in dispute, the sellers and theGroup held discussions to achieve reconciliation, and the parties reached a settlement in August 2023. Meanwhile, the impact of the settlementon the Group’s financial position and operating results is immaterial.

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Financial Report 2024

38. SIGNIFICANT SUBSEQUENT EVENTS(1) Repurchase of Treasury Shares
The Company resolved, at the meeting of the Board of Directors held on February 14, 2024, on matters concerning the repurchase of treasury
shares pursuant to the provisions of Article 156 of the Companies Act, as applied mutatis mutandis under the provisions of Article 165,
Paragraph 3 of the Act. Details of the repurchase.
(1) Class of shares to be repurchased: Common shares of the Company(2) The total number of shares to be repurchased: 10,000,000 shares (maximum)(3) Total repurchase cost: ¥20,000 million (maximum)(4) Repurchase period: February 15, 2024 to October 31, 2024
(5) Method of repurchase: Market purchases on the Tokyo Stock Exchange through a discretionary trading authorization agreement (planned)(6) R eason for repurchase: To further enhance shareholder value through the improvement of capital efficiency and the increased return ofprofits to shareholders.
Subsequently, the company executed the repurchase of treasury shares as follows.
(1) Type of shares repurchase: Common shares of the Company(2) Total number of repurchased shares: 1,175,800 shares(3) Total amount of repurchased shares: ¥4,947 million(4) Repurchase period: From February 15, 2024 to April 30, 2024
(5) Method of repurchase: Market purchases on the Tokyo Stock Exchange through a discretionary trading authorization agreement.

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Information Services International-Dentsu, Ltd.1,2,3,4
Geographic Area: Japan
Equity Held by Dentsu: 61.8% (0.0%)

Subsidiaries and Affiliates
As of December 31, 2023, the Dentsu Group includes
808 consolidated subsidiaries and 85 affiliatedcompanies accounted for by the equity method.

Dentsu Corporate One Inc.1
Geographic Area: Japan
Equity Held by Dentsu: 100.0%

Consolidated subsidiaries
Dentsu Inc.1
Geographic Area: Japan
Equity Held by Dentsu: 100.0%

Dentsu Creative Advertising, LLC(formerly Dentsu
McGarry Bowen, LLC)1,3
Geographic Area: USA
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu East Japan Inc.
Geographic Area: Japan
Equity Held by Dentsu: 100.0%
Dentsu West Japan Inc.
Geographic Area: Japan
Equity Held by Dentsu: 100.0%

Dentsu Creative, LLC(formerly The 360i Network,LLC)1,3
Geographic Area: USA
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Kyushu Inc.
Geographic Area: Japan
Equity Held by Dentsu: 100.0%

Dentsu US, Inc.1,3
Geographic Area: USA
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Runway Inc.
Geographic Area: Japan
Equity Held by Dentsu: 100.0%

Merkle Group Inc.3
Geographic Area: USA
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Digital Inc.3
Geographic Area: Japan
Equity Held by Dentsu: 100.0% (25.0%)

Isobar US, LLC1,3
Geographic Area: USA
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Live Inc.
Geographic Area: Japan
Equity Held by Dentsu: 100.0%

Dentsu International Americas, LLC1,3
Geographic Area: USA
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Promotion Plus Inc.
Geographic Area: Japan
Equity Held by Dentsu: 100.0%

Agenciaclick - Midia Interativa S.A.1,3
Geographic Area: Brazil
Equity Held by Dentsu: 100.0% (100.0%)

Carta Holdings, Inc.2
Geographic Area: Japan
Equity Held by Dentsu: 53.4%

Dentsu Brasil Holdings Ltda.3
Geographic Area: Brazil
Equity Held by Dentsu: 100.0% (100.0%)

Septeni Holdings Co., Ltd.1,2
Geographic Area: Japan
Equity Held by Dentsu: 52.6%

Tag Worldwide Holdings Limited3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)90Dentsu Group Integrated Report 2024

Financial Report 2024

Tag Europe Limited3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Singapore Holdings Pte. Ltd.1,3
Geographic Area: Singapore
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Aegis Network Central Europe Holding
GmbH3
Geographic Area: Germany
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Asia Pte. Ltd.1.3
Geographic Area: Singapore
Equity Held by Dentsu: 100.0% (100.0%)
Dentsu Aegis Network India Private Limited1,3
Geographic Area: India
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Aegis Network Central Europe GmbH
Geographic Area: Germany
Equity Held by Dentsu: 100.0% (100.0%)3

Dentsu Australia Holdings Pty Ltd.1,3
Geographic Area: Australia
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu France SAS
Geographic Area: France
Equity Held by Dentsu: 100.0% (100.0%)
1,3

Dentsu International Australia Pty Ltd.1,3
Geographic Area: Australia
Equity Held by Dentsu: 100.0% (100.0%)

Aegis France SAS
Geographic Area: France
Equity Held by Dentsu: 100.0% (100.0%)
1,3

Dentsu Corporate Services Ltd.1,3
Geographic Area: Australia
Equity Held by Dentsu: 100.0% (100.0%)

Aegis International Holding Company B.V.
Geographic Area: Netherlands
Equity Held by Dentsu: 100.0% (100.0%)

1,3

Dentsu International Limited1
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0%

Group Carat (Nederland) B.V.
Geographic Area: Netherlands
Equity Held by Dentsu: 100.0% (100.0%)
1,3

Dentsu International Holdings Limited1,3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Media, S.L.U.
Geographic Area: Spain
Equity Held by Dentsu: 100.0% (100.0%)
1,3

Portman Square US Holdings Limited1,3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu (Shanghai) Investment Co., Ltd.
Geographic Area: China
Equity Held by Dentsu: 100.0% (100.0%)

1,3Beijing Dentsu Advertising Co., Ltd.
Geographic Area: China
Equity Held by Dentsu: 100.0%

Dentsu International Group Participations
Limited1,3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu Asia Pacific Holdings Pte. Ltd.1,3
Geographic Area: Singapore
Equity Held by Dentsu: 100.0% (100.0%)

Dentsu International Triton Limited3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)91

Dentsu Group Integrated Report 2024

Dentsu International GPS Holdings Limited1,3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)

Information for shareholders

Dentsu International Finance Ltd.3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)

Corporate Headquarters
1-8-1, Higashi-shimbashi, Minato-ku,
Tokyo 105-7050, Japan
Phone: +81-3-6217-6600(As of December 31, 2023)
Dentsu Group Inc.

Dentsu International Regents Place Finance
Limited3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)

Contact Info
Investor Relations Department,Group IR Office,1-8-1, Higashi-shimbashi, Minato-ku,
Tokyo 105-7050, Japan
https://contact.group.dentsu.com/m/en_ir

Dentsu International Treasury Limited3
Geographic Area: United Kingdom
Equity Held by Dentsu: 100.0% (100.0%)

Stock Exchange Listing
Tokyo Stock Exchange, Prime Market
Securities code: 4324

and 761 other companies

1. Specified subsidiary
2. C ompany that submits an annual securities report
3. In Equity held by Dentsu, the figure in parentheses indicates the ratio of
equity held indirectly.
4. N ame changed to Dentsu Soken Inc. on 1 January 2024.

Capital¥ 74,609.81 million

Equity-accounted investees
Video Research Ltd.
Geographic Area: Japan
Equity Held by Dentsu: 34.2%

Total Number of Shares Issued
270,165,354
General Meeting of Shareholders
The Ordinary General Meeting of Shareholders
is held in Tokyo in March each year.

D2C Inc.
Geographic Area: Japan
Equity Held by Dentsu: 46.0%
Transfer Agent
The Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo
100-8212, Japanand 83 additional companies

Internet Address
https://www.group.dentsu.com/en/

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Financial Report 2024

Independent auditor’s report
To the Board of Directors of Dentsu Group Inc.
Report on the Audit of the Consolidated Financial Statements
OpinionWe have audited the accompanying consolidated financial statements of Dentsu Group Inc. (“theCompany”) and its consolidated subsidiaries (collectively referred to as “the Group”), which comprisethe consolidated statement of financial position as at December 31, 2023, and the consolidated
statements of income, comprehensive income, changes in equity and cash flows for the year thenended, and notes, comprising material accounting policies and 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 December 31, 2023, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance with IFRS
Accounting Standards as issued by the International Accounting Standards Board prescribed in Article
93 of “the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial
Statements” (IFRS Accounting Standards)
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 Company’s estimate of the recoverable amount used in the valuation of
goodwill in EMEA and APAC
The key audit matter

How the matter was addressed in our audit

As described in Note 15. “GOODWILL AND
INTANGIBLE ASSETS” to the consolidated

The primary procedures we performed to assess
the reasonableness of the Company’s estimate of93

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financial statements, Dentsu Group Inc.
(hereinafter, the “Company”) recognized
goodwill of ¥831,121 million (23% of total
assets) in the consolidated statement offinancial position for the current fiscal year.
Included therein was goodwill of ¥235,570
million in EMEA. The carrying amount of
goodwill in APAC was nil at the end of thecurrent fiscal year.
As the Company has adopted International
Financial Reporting Standards (IFRSs),
impairment tests for goodwill are performed
annually and whenever there is an impairment
indicator. The recoverable amount in the
impairment test for goodwill is determined at
the higher of either the fair value less costs ofdisposal or the value in use of an asset or acash-generating unit. When the carrying
amount exceeds the recoverable amount, an
impairment loss is recognized.

the recoverable amounts used in the valuation of
goodwill in EMEA and APAC are set forth
below. The audit procedures included those
performed by the component auditor of Dentsu
International Limited, a consolidated subsidiaryand intermediate holding company that owns theshares of the companies that operate theCompany’s international business. We instructed
the component auditor to perform audit
procedures and evaluated their reports toconclude on whether sufficient and appropriate
audit evidence was obtained.
● We assessed the appropriateness of key

assumptions adopted by management incalculating the value in use by inquiring ofmanagement and the personnel responsible
for the business plans regarding the basis onwhich those key assumptions weredeveloped.

For the current fiscal year, the Company
recognized an impairment loss on goodwill of¥67,804 million in APAC as a result of theimpairment test for the groups of cashgenerating units including goodwill in EMEA
and APAC.

● To assess key assumptions that formed thebasis for estimating the recoverable amountsof each group of cash-generating units, we:・assessed the accuracy of the estimates
underlying the key assumptions bycomparing the past estimates with actual
results, and obtained an understanding of theeffect each assumption had on the
impairment test by performing a sensitivity
analysis;

The Company calculated the recoverable
amounts in the impairment test for the groupsof cash-generating units to which goodwill in
EMEA and APAC were allocated using thevalue in use based on the budget for thefollowing fiscal year approved by management
and the forecast for the additional four
subsequent fiscal years.

・evaluated operating margins in the pastbusiness plans by analyzing the causes ofany variances with actual results, andassessed whether the identified causes of thevariances were appropriately considered andincorporated into the assumptions throughdiscussions with management and personnel
responsible for the business plans;

Key assumptions adopted by management as
the basis for calculating the value in use
included operating margin, net working capital,
medium-term growth rates for net revenue,
perpetual growth rates, discount rates, and theallocation ratios of central costs. While theseassumptions were developed using
management’s best estimate and judgment
made based on the historical business results
and the business plans approved bymanagement, they were inherently uncertain as
they may be affected by changes in businessstrategies and market conditions. Accordingly,
management’s estimate and judgment thereon
had a significant effect on the estimate of thevalue in use. In addition, selecting appropriate
input data for estimating the discount rates

・assessed the appropriateness of the net
working capital assumptions by comparing
them with the historical monthly trends;
・assessed the reasonableness of the mediumterm growth rates for net revenue by
discussing with management and thepersonnel responsible for the businessplans, and performing trend analysis ofhistorical business results as well ascomparative analysis with global advertising94

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required a high degree of expertise invaluation.

cost growth projections published;・assessed the appropriateness of theperpetual growth rate assumptions bytracing them to data published by externalorganizations;We, therefore, determined that our assessmentof the reasonableness of the Company’s
estimate of the recoverable amounts used in thevaluation of goodwill in EMEA and APAC
was one of the most significant matters in our
audit of the consolidated financial statements
for the current fiscal year, and accordingly, a
key audit matter.

・assessed the appropriateness of the discountrate assumptions with the assistance of avaluation specialist within our network firmsby comparing them with the discount rates
that the valuation specialist independently
estimated based on external information;
and・assessed the appropriateness of theassumptions for the allocation ratios ofcentral costs to each group of cashgenerating units by inspecting a breakdownof central costs and analyzing therelationship between each cost element andthe generation of cash inflows at the level ofthe group of cash-generating units.

Reasonableness of the Company’s estimate of the recoverable amount used in the valuation of the
cash-generating unit including the right-of-use asset related to the lease contract for the officebuilding
The key audit matter

How the matter was addressed in our audit

As described in Note 16. “LEASES” to theconsolidated financial statements, theCompany recognized right-of-use assets of¥139,252 million (4% of total assets) in the
consolidated statement of financial position
for the current fiscal year. Included therein
was the right-of-use asset of ¥25,759
million related to the lease contract for theoffice building in New York, U.S., enteredinto by the Group as a lessee in November
2019, which was subject to real estate
optimization as part of its restructuring. The
lease period ends on July 31, 2038.

The primary procedures we performed to assess
the reasonableness of the Company’s estimate of
the recoverable amount used in the valuation of
the cash-generating unit including the right-ofuse asset related to the lease contract for theoffice building are set forth below.

While the recoverable amount used in thevaluation of a cash-generating unit
including the right-of-use asset wasestimated using future subleases, it was
expected to be less than the carrying
amount even if the future sublease income
was taken into account. Therefore, theCompany reduced the carrying amount of

For the reasonableness of the Company’s
estimate of the recoverable amount for the cashgenerating unit including the right-of-use asset,
we instructed the component auditor of Dentsu
International Limited, a consolidated subsidiary,
to perform audit procedures and evaluated theirreports to conclude on whether sufficient andappropriate audit evidence was obtained fromthe following audit procedures, among others:・assessment of whether key assumptions
adopted by management for calculating therecoverable amount were appropriate byinquiring of management and the expert
used by management about the basis onwhich those assumptions were developed;and95

Dentsu Group Integrated Report 2024

the right-of-use asset to its recoverable
amount in the consolidated statement offinancial position, and the resulting
decrease in the carrying amount wasrecognized as an impairment loss in the
consolidated statement of income.

・assessment of the consistency of key
assumptions related to the basic subleasefee, expected rate of increase in lease
payments over the lease term, lease
incentive, and void periods with available
information published by external researchorganizations or market data obtained withthe assistance of a real estate valuation
specialist within our network firms.

Key assumptions adopted by management
for measuring the recoverable amount usedin the valuation of the cash-generating unit
including the right-of-use asset included thebasic sublease fee, expected rate of increasein lease payments over the lease period,
lease incentive, and void periods. As theseassumptions were developed taking into
account uncertainty at the balance sheet
date, they may be affected by the changes
in market conditions and the occurrence of
unpredictable events. Accordingly,
management’s estimate and judgment
thereon had a significant effect on theaccounting estimates.
We, therefore, determined that ourassessment of the reasonableness of theCompany’s estimate of the recoverable
amount used in the valuation of the cashgenerating unit including the right-of-use
asset related to the lease contract for theoffice building was one of the mostsignificant matters in our audit of theconsolidated financial statements for thecurrent fiscal year, and accordingly, a key
audit matter.
Other Information

The other information comprises the information included in the Financial Report, but does not include
the consolidated financial statements, the financial statements, and our auditor’s reports thereon.
Management is responsible for the preparation and presentation of the other information. The audit
committee is responsible for overseeing the directors’ performance of their duties with regard to thedesign, implementation and maintenance of the reporting process for the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.

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If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the audit committee for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements thatare 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 IFRS Accounting Standards.
The audit committee is responsible for overseeing the directors’ performance of their duties 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, andobtain 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 IFRS Accounting Standards, the overall presentation, structure and content of the97

Dentsu Group Integrated Report 2024consolidated financial statements, including the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events in a manner that achieves fairpresentation.
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 committee regarding, among other matters, the planned scope andtiming of the audit, significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethicalrequirements regarding independence, and communicate with them all relationships and other mattersthat may reasonably be thought to bear on our independence, and where applicable, actions taken toeliminate threats or safeguards applied.
From the matters communicated with the audit committee, we determine those matters that were ofmost 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 report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of such communication.
Fee-related Information
Fees paid or payable to our firm and to other firms within the same network as our firm for audit andnon-audit services provided to the Company and its subsidiaries are described in Note “26. SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES” of the Financial Report.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended December 31, 2023 are presented solely for convenience. Our audit also included the translationof yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on thebasis described in Note “2. BASIS OF PREPARATION (3) Functional Currency and Presentation
Currency” to the consolidated financial statements.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.

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Financial Report 2024

Hideaki Koyama
Designated Engagement Partner
Certified Public Accountant
Kentaro Maruta
Designated Engagement Partner
Certified Public Accountant
Shuji Ezawa
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Tokyo Office, JapanMay 14, 2024
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.

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