FAST RETAILING CO., LTD.
迅 銷 有 限 公 司*

Third Quarterly Report 2013/14
2014.3.1–2014.5.31
Stock Code: 6288
* For identification purpose only

Contents
Corporate Profile

2

Financial Highlights

3Management Discussion and Analysis

5

Information about the Reporting Entity

9

Financial Section

11

Interim Consolidated Balance Sheet

12Interim Consolidated Statement of Income

14Interim Consolidated Statement of Comprehensive Income

16Interim Consolidated Statement of Cash Flows

18

Notes to Interim Consolidated Financial Information

21

Report on Review of Interim Financial Information

27

Summary of Material Differences between
International Financial Reporting Standards (“IFRSs”) and
Generally Accepted Accounting Principles in Japan (“JGAAP”)

28

Corporate Profile
Board of Directors
Executive Director

Principal Place of Business in Japan
Midtown Tower 9-7-1
Akasaka Minato-ku
Tokyo 107-6231
Japan

Mr. Tadashi Yanai (Chairman of the Board, President andChief Executive Officer)

Non-Executive Directors
Principal Place of Business in Hong Kong

Mr. Toru Murayama (Outside Director)
Mr. Takashi Nawa (Outside Director)

704-705, 7th Floor, Miramar Tower,
No. 132 Nathan Road
Tsim Sha Tsui
KowloonHong Kong

Independent Non-Executive Directors
Mr. Toru Hambayashi (Outside Director)
Mr. Nobumichi Hattori (Outside Director)
Mr. Masaaki Shintaku (Outside Director)

HDR Registrar and HDR Transfer Office
Statutory Auditors

Computershare Hong Kong Investor Services Limited
Shops 1712–1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
WanchaiHong Kong

Mr. Akira Tanaka (Kansayaku) (Standing Statutory Auditor)
Mr. Masaaki Shinjo (Kansayaku) (Standing Statutory
Auditor)Mr. Takaharu Yasumoto (Shagai Kansayaku) (Outside
Statutory Auditor)
Mr. Akira Watanabe (Shagai Kansayaku) (Outside Statutory
Auditor)Ms. Keiko Kaneko (Shagai Kansayaku) (Outside Statutory
Auditor)

Stock CodeHong Kong: 6288
Japan: 9983

Joint Company Secretaries

Website Address

Japan: Mr. Mitsuru Ohki
Hong Kong: Ms. Choy Yee Man

http://www.fastretailing.com

Auditors
Ernst & Young ShinNihon LLC

Principal Banks
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mizuho Bank, Ltd.
The Hong Kong and Shanghai Banking Corporation Limited

Registered Office and Headquarters
717-1 Sayama
Yamaguchi City
Yamaguchi 754-0894
Japan

—2—

Financial Highlights
Financial Summary
Nine months
ended
31 May 2013

Nine months
ended
31 May 2014

Fiscal yearended
31 August 2013

Net sales (Millions of yen)

885,814

1,088,004

1,143,003

Ordinary income (Millions of yen)

142,034

141,163

148,979

Net income (Millions of yen)

88,421

84,83690,377

Accounting period

Comprehensive income (Millions of yen)

239,452

85,535

205,329

Total net assets (Millions of yen)

613,827

635,078

579,591

Total assets (Millions of yen)

910,991

955,707885,800

Basic net income per share (Yen)867.97832.50887.12

Diluted net income per share (Yen)867.14

831.70886.31

65.1

63.8

63.2

Net cash from operating activities (Millions of yen)

100,842

113,203

99,439Net cash (used in) investing activities (Millions of yen)

(53,541)(39,314)(63,901)

Equity ratio (%)

Net cash (used in) financing activities (Millions of yen)

(22,236)(35,774)(23,945)

Cash and cash equivalents at end of period (Millions of yen)

314,168

339,020295,622

Three months
ended
31 May 2013

Three months
ended
31 May 2014

270,972

323,654

Accounting period
Net sales (Millions of yen)
Net income (Millions of yen)

22,971

20,279Basic net income per share (Yen)

225.46198.98(Notes)1. The Company has prepared interim consolidated financial statements, and therefore has not included information
regarding changes in key management indices for the submitting company.
2. Net sales does not include consumption taxes, etc.

—3—Business Description
There were no significant changes in the nature of business engaged in by the Group (the Company and its subsidiaries) during
the nine months ended 31 May 2014.
Important changes concerning subsidiaries are as follows:(UNIQLO International)
Newly consolidated subsidiaries:
UNIQLO Pennsylvania LLC
UNIQLO Massachusetts LLCUNIQLO AUSTRALIA PTY LTD
Excluded from consolidation:
UNIQLO FRANCE S.A.S.
(Global Brands)
Newly consolidated subsidiaries:
GU (Shanghai) Trading Co., Ltd.*
Comptoir des Cotonniers (Shanghai) Trading Co., Ltd.*PRINCESSE TAM.TAM (SHANGHAI) TRADING CO., LTD.*J BRAND Japan Co., LTD.
J BRAND EUROPE LTD
Theory HL Brentwood, Inc.
Excluded from consolidation:
LTH GmbH(Others)
Newly consolidated subsidiaries:
Theory Holdings LLC
FAST RETAILING UK LTD
UNIQLO GLOBAL INNOVATION CENTER INC.
*

The English names of all subsidiaries established in the People’s Republic of China are translated for identification purpose
only.

—4—

Management Discussion and Analysis
Business Review
1. Business and Operational Risks
No new business-related risks have arisen during the nine months ended 31 May 2014.
There have been no important changes concerning business-related risks as stated in the securities report for thepreceding consolidated fiscal year.

2.

Significant Contract in Business Operation
None.

3.

Financial Analysis(1) Results of Operations
The Group reported the following cumulative third-quarter consolidated results for the period spanning 1 September 2013 –31 May 2014: consolidated net sales of ¥1.088 trillion (+22.8% year-on-year), operating income of ¥136.2 billion (+9.9% yearon-year), ordinary income of ¥141.1 billion (-0.6% year-on-year) and net income of ¥84.8 billion (-4.1% year-on-year). All Group
operations reported rising net sales and operating income, with UNIQLO International reporting a particularly strong expansion
in both net sales and income over the nine-month period. In terms of non-operating income, the Group reported a year-onyear contraction in foreign exchange profits of ¥12.5 billion. This factor was largely contributed by the slight year-on-year
contractions in the consolidated figures for ordinary income and net income.
The Group’s medium-term vision is to become the world’s number one apparel manufacturer and retailer. In pursuit of this aim,
we are committed to promoting globalization, strengthening our overall Group management and reigniting our entrepreneurial
spirit. We have focused much of our efforts on building our global UNIQLO operations by accelerating the pace of new store
openings outside of Japan. We have also opened global flagship stores and hotspot stores in major cities around the world inorder to boost awareness and visibility of the UNIQLO brand and to strengthen our global operational base. Within our Global
Brands segment, we have been actively expanding our low-priced GU casualwear brand, and our Theory fashion label.
UNIQLO Japan
UNIQLO Japan reported gains in both net sales and income during the nine months ended 31 May 2014, with net sales reaching¥569.4 billion (+5.1% year-on-year) and operating income ¥94.8 billion (+7.3% year-on-year). A 2.4% gain in same-store sales
helped boost the cumulative third-quarter performance. Sales per store also increased as a direct result of our “scrap andbuild” strategy to increase the average size of our sales floors by replacing smaller outlets with large-format stores. The total
number of UNIQLO stores in Japan increased by 8, to 841 stores at the end of May 2014 compared to end of May 2013. This
figure excludes the operation’s 21 franchise stores. Breaking down the 2.4% gain in same-store sales, customer visits decreased
by 0.5% year-on-year, while the average customer spending increased by 2.8%. On the profit side, the gross profit margin
improved by 1.7% year-on-year for the nine months ended 31 May 2014, with strong sales of core spring/summer ranges
and new seasonal items enabling us to maintain discounting at the planned level. On the other hand, the selling, general andadministrative expenses to net sales ratio increased by 1.3% over the nine months ended 31 May 2014, mainly due to higher
in-store personnel costs for part-time and temporary workers, and higher distribution and warehouse costs related to thecompany’s decision to boost inventory of basic year-round items.
UNIQLO International
UNIQLO International performed as planned during the nine months ended 31 May 2014, generating significant gains in both
net sales and income. UNIQLO International reported total net sales of ¥327.7 billion (+71.3% year-on-year) and operating
income of ¥34.3 billion (+75.1% year-on-year). UNIQLO International contributed over 30% of consolidated net sales over thenine-month period. UNIQLO operations in Greater China (Mainland China, Hong Kong and Taiwan), South Korea, and Europe allreported continued strong gains in same-store sales, and higher-than-expected rises in both net sales and income over the ninemonth period. The total number of UNIQLO International stores expanded to 598 stores at the end of May 2014, a net increaseof 188 stores compared to the end of May 2013.

—5—

UNIQLO Greater China exceeded company’s expectations, generating significant gains in both net sales and income. UNIQLO
opened 77 stores and closed 2 stores over the nine-month period, to bring the total number of UNIQLO stores in Greater China
to 355 at the end of May 2014. UNIQLO South Korea also generated higher-than-expected gains in net sales and income, thanks
to continued growth in same-store sales. South Korea has a total of 132 UNIQLO stores at the end of May 2014. UNIQLO Europe(U.K., France, Russia and Germany) generated higher-than-expected gains in both net sales and income during the nine months
ended 31 May 2014. Our first UNIQLO store in Germany, a global flagship store opened in Berlin in April 2014 and has alreadygenerated favorable sales.
At UNIQLO USA, our prominent UNIQLO New York Fifth Avenue, Soho and 34th Street stores continued to generate doubledigit growth in combined sales. Meanwhile, the 14 stores opened in various U.S shopping malls over the past nine months are
performing well, with net sales proving especially strong in our West Coast stores. However, UNIQLO USA is still operating ata loss, due to the cost of opening increasing numbers of stores. UNIQLO operations in Southeast Asia and Oceania reported alower-than-expected level of operating income during the nine months ended 31 May 2014, after net sales fell short of target in
the third quarter from March to May 2014. However, the first Australian UNIQLO store, opened in Melbourne in April 2014, isperforming well, with net sales exceeding our initial target.
Global Brands
The Global Brands segment reported rising sales and income during the nine months ended May 2014, with net sales reaching¥188.8 billion (+25.2% year-on-year) and operating income expanding to ¥14.9 billion (+11.3% year-on-year). However, the gain
in operating income was slightly lower than originally forecasted. There were two main reasons for this shortfall: GU did not sell
as well as expected in the third quarter from March to May 2014, and the overall performance from our J Brand premium denim
label also fell short of target in the third quarter. Over the nine months ended 31 May 2014, our low-priced GU casualwear
brand reported rising net sales and a slight increase in operating income, while our Theory fashion brand reported rising net
sales and steady operating income. Our France-based women’s fashion brand, Comptoir des Cotonniers, generated larger-thanexpected gains in both net sales and operating income, while our French corsetry, homewear and swimwear brand, Princesse
tam.tam, reported an unexpected fall in income.
Corporate Social Responsibility (“CSR”) and Environmental Protection
The basic policy underlying the Group’s CSR activities consists of “Fulfilling our social responsibility”, “Contributing to society”,
and “Solving social issues and creating new value”, and the Group’s activities are conducted globally and locally.
Already more than a year has passed since the 24 April 2013 collapse of the Rana Plaza building, a commercial facility locatedin Savar, an industrial suburb of Bangladesh’s capital Dhaka. With the understanding that ensuring the safety of workers in ourpartner factories is one of our most important priorities, we have doubled our efforts in fire prevention and ensuring building
safety. Reports on progress in our initiatives for improvement in the past year such as conducting voluntary inspections andsigning the Accord on Fire and Building Safety in Bangladesh can be found on our website.
Approximately three years have passed since the Great East Japan Earthquake, and we are continuing our efforts to provide
recovery support through the UNIQLO Recovery Assistance Project. Reports of recent activities and their progress can be foundon our website.
In addition, the All-Product Recycling Initiative, in which UNIQLO and GU products are collected from customers and delivered
to people who are in need of clothing, has collected more than 29,150,000 items cumulatively at stores in 10 countries, and has
donated 11,290,000 articles of clothing to 46 countries (as of 31 March 2014). Since the end of March this year, we have beenrunning a clothing donation drive at all UNIQLO stores in Japan to deliver warm clothing to refugees in Syria who are in urgent
need of clothing this winter.

—6—

(2)

Financial Positions
Total assets as at 31 May 2014 were ¥955.7 billion, which was an increase of ¥69.9 billion relative to the end of thepreceding consolidated fiscal year. The principal factor was an increase of ¥75.7 billion in cash and deposits.
Total liabilities as at 31 May 2014 were ¥320.6 billion, which was an increase of ¥14.4 billion relative to the end of thepreceding consolidated fiscal year. The principal factors were a decrease of ¥3.6 billion in provisions and an increase of¥17.2 billion in current liabilities – others.
Total net assets as at 31 May 2014 were ¥635.0 billion, which was an increase of ¥55.4 billion relative to the end of thepreceding consolidated fiscal year. The principal factor was an increase of ¥54.2 billion in retained earnings.

(3)

Cash Flows Information
Cash and cash equivalents (hereinafter referred to as “funds”) as at 31 May 2014 had increased by ¥43.3 billion relative tothe end of the preceding consolidated fiscal year, to ¥339.0 billion.
Net cash from operating activities for the nine months ended 31 May 2014 was ¥113.2 billion, which was an increase of¥12.3 billion relative to the nine months ended 31 May 2013. The principal factor was income before income taxes andminority interests of ¥141.5 billion.
Net cash used in investing activities for the nine months ended 31 May 2014 was ¥39.3 billion, which was a decrease of¥14.2 billion relative to the nine months ended 31 May 2013. The principal factor was the acquisition of property, plantand equipment amounted to ¥30.3 billion.
Net cash used in financing activities for the nine months ended 31 May 2014 was ¥35.7 billion, which was an increase of¥13.5 billion relative to the nine months ended 31 May 2013. The principal factor was dividends amounted to ¥30.5 billion
paid in cash.

(4)

Operational and Financial Assignment
There have been no important changes during the nine months ended 31 May 2014 concerning issues that must be
addressed by the Group.

(5)

Research and Development
Not applicable.

—7—

(6)

Important Facilities
The following are the important facilities that were newly completed during the nine months ended 31 May 2014.
<Subsidiaries in Japan>

Company name

Type of facility

Name of business

Location

Completion dateToshima-ku, Tokyo

March 2014

April 2014

UNIQLO CO., LTD

UNIQLO JapanStoreUNIQLO Ikebukuro
Sunshine 60 DoriStoreUNIQLO CO., LTD

UNIQLO JapanStoreUNIQLO
Okachimachi Store

Taito-ku, Tokyo

Type of facility

Name of business

Location

Completion date

UNIQLO TAIWAN LTD.*UNIQLOInternational store

UNIQLO Xinzhuang
Zhongzheng Road
Store

Taipei, Taiwan

October 2013

FAST RETAILING (SHANGHAI)
TRADING CO.,LTD.*UNIQLOInternational store

UNIQLO Shanghai
Store

Shanghai, China

September 2013

FAST RETAILING (CHINA) TRADING
CO., LTD.*UNIQLOInternational store

UNIQLO Victoria
Plaza store

Guangzhou, China

March 2014

UNIQLO EUROPE LIMITEDUNIQLOInternational store

UNIQLOTAUENTZIEN

Berlin, Germany

April 2014

UNIQLO EUROPE LIMITEDUNIQLOInternational store

Francs Bourgeois

Paris, France

April 2014

<Overseas Subsidiaries>
Company name*

The English names of all subsidiaries established in the People’s Republic of China and Taiwan are translated for
identification purpose only.

—8—

Information about the Reporting Entity
1. Stock Information(1) Number of Shares(i)

Total number of shares
Type

Total number of authorised shares (shares)

Common stock

300,000,000
Total

300,000,000(Note) There are no provisions for preemptive rights under the Companies Act of Japan, which would oblige the Company tooffer new shares on a pro rata basis to existing shareholders.
(ii)

Shares Issued

Type

As at 31 May 2014

Number of shares issued
as of submission date
(Shares)(As at 15 July 2014)

Common stock

106,073,656

106,073,656

Total

106,073,656

106,073,656

Name of financial
instrument exchangeof listing, or authorised
financial instruments
firms association

Details

First section of the Tokyo
Stock Exchange and theMain board of The Stock
Exchange of Hong Kong
Limited (Note)

100 sharesas one unit——

(Note) Hong Kong Depositary Receipts (“HDRs”) are listed on the Main Board of The Stock Exchange of Hong Kong Limited.

(2)

Subscription Rights to Shares
Not applicable(3)

Exercise of convertible bonds with conditional permission for adjustment of exercise priceNot applicable.

(4)

Content of Rights Plan
Not applicable.

(5)

Change in Total Number of Shares Issued, Capital Stock, Etc.

Dates

1 March 2014 to
31 May 2014

Increase/
Balance of total
Increase/
Increase/decrease of
Balance ofBalance of
number of
decrease of
decrease of
total number ofcapital stock
capital reserve
shares issued
capital stock
capital reserve
shares issued(Millions of yen)
(Millions of yen)
(Shares)(Millions of yen)
(Millions of yen)
(Shares)—

106,073,656—

10,273—

4,578(Note) There was no increase or decrease of the total number of shares issued, capital stock or capital reserve during the threemonths ended 31 May 2014.

—9—

(6)

Principal Shareholders
There are no items to state, as the accounting period under review is the third quarter accounting period.

(7)

Voting Rights
Concerning “Voting Rights” as of the end of the third quarterly accounting period ended 31 May 2014, it has not beenpossible to confirm and state the details entered in the register of shareholders. Therefore, the stated details are basedon the register of shareholders as of the immediately preceding record date (28 February 2014).

(i)

Shares issued
As at 31 May 2014Class

Non-voting shares
Shares subject to restrictions on voting rights(treasury stock)
Shares subject to restrictions on voting rights(other)Number of shares(Shares)Number of voting rights(Number)

Remarks

—

—

—

—

—

—

—

—

—

—

—

(Shares held astreasury stock)
Common stock

Shares with full voting rights(treasury stock, etc.)

4,162,400
Common stock
101,864,500

Shares with full voting rights (other)(Note) 1—(Notes) 1,2——

1,018,645—

Common stock

Shares less than one unit

46,756

Total number of shares issued

106,073,656

Total number of voting rights of allshareholders—(Notes)1,018,645

1. The columns for the number of shares of “Shares with full voting rights (other)” and “Shares less than one unit”
respective include 2,700 shares and 84 shares held in the name of Japan Securities Depository Center, Inc.
2. Common stock in the “Shares less than one unit” column includes 82 shares of treasury stock held by theCompany.

(ii)

Treasury StockAs at 31 May 2014

Name or trade name ofholderFast Retailing Co., Ltd.

Holder’s address

717-1 Sayama,
Yamaguchi City,

Number of

Number ofshares held in
own nameshares held inother’s name(Shares)(Shares)

Total number

Percentage ofof shares held
(Shares)

total number ofshares issued (%)

4,162,400—

4,162,400

3.92

4,162,400—

4,162,400

3.92

Yamaguchi
Total

2.

—

Board of Directors
Since submission of the securities report for the preceding consolidated fiscal year, there has been no change in directors
during the nine months ended 31 May 2014.

— 10 —

Financial Section
1. Preparation of Interim Consolidated Financial Statements
The interim consolidated financial statements of the Group were presented by reference to the “Rules Governing Term, Formand Preparation of Consolidated Quarterly Financial Statements” (2007 Cabinet Office Ordinance No. 64, which is hereinafterreferred to as “Consolidated Quarterly Financial Statements Rules”).
2. Review Certification
Pursuant to the first clause of Article 193-2 of the Financial Instruments and Exchange Act, the quarterly and interim
consolidated financial statements of the Group for three months and nine months ended 31 May 2014, respectively, arereviewed by Ernst & Young ShinNihon LLC.

— 11 —

(Amounts in millions of Japanese Yen and are rounded down to the nearest million unless otherwise stated)

1. Interim Consolidated Financial Statements(1)

Interim Consolidated Balance Sheet(Millions of yen)Note

As at 31 August 2013ASSETS
Current assets
Cash and deposits

As at 31 May 2014

Allowance for doubtful accounts

34,187148,215
166,654
4,002
8,980
113,641
17,486(488)

Total current assets

640,109223,227
58,983
115,974
170,404
4,543
1,607
96,41020,328(549)
690,930

90,405

112,176

Others31,691
46,423

Total intangible assets

78,11527,776
46,837
74,613
77,985
264,776955,707

147,429

Notes and accounts receivable – trade
Short-term investment securities
Inventories
Deferred tax assets
Income taxes receivable
Forward currency contracts
OthersNon-current assets
Property, plant and equipment
Intangible assets
Goodwill

Investments and other assets

77,170*1

245,690

Total non-current assets

885,800

Total assets
LIABILITIESCurrent liabilities
Notes and accounts payable – trade
Short-term loans payable
Current portion of long-term loans payable
Income taxes payable
Provision
Others121,951
1,862
3,632
26,005
10,08190,432

Total current liabilities

253,966

Non-current liabilities
Long-term loans payable
Provision

21,92675
30,240

Others52,243

Total non-current liabilities

306,209

Total liabilities— 12 —

121,606
2,855
4,292
27,5386,420
107,713
270,426
19,997
81
30,12350,201
320,628

(Millions of yen)
As at 31 August 2013
NET ASSETSStockholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost

10,273
5,963
482,109(15,851)

Total stockholders’ equity

482,495

Accumulated other comprehensive income
Unrealised gains/(losses) on available-for-salesecurities
Deferred gains/(losses) on hedges
Foreign currency translation adjustments(6,978)71,005
12,875

Total accumulated other comprehensive income

76,901

Subscription rights to shares

1,170
19,024

Minority interests

579,591

Total net assets

885,800

Total liabilities and net assets— 13 —

As at 31 May 2014

10,2736,365
536,374(15,797)537,216(5,243)62,126
15,412
72,296
1,694
23,870635,078955,707

(2)Interim Consolidated Statement of Income
Nine months ended 31 May(Millions of yen)
Nine months ended
31 May 2013

Net sales

Nine months ended
31 May 2014

Cost of sales

885,814441,869

Gross profit

443,944

Selling, general and administrative expenses

319,907

Operating income

124,037

Non-operating income
Interest and dividend income
Foreign exchange gains
Others411
17,886699

Total non-operating income

18,997

Non-operating expenses
Interest expenses

400
600

Others1,001

Total non-operating expenses

142,034

Ordinary income

1,088,004
537,243
550,760
414,467
136,292
643
5,350
862
6,856
721
1,263
1,985
141,163

Extraordinary gains
Gains on sales of non-current assets

114

Total extraordinary gains

114

Extraordinary losses
Loss on retirement of non-current assets
Expenses incurred upon acquisition

250
752
576

Others1,579

Total extraordinary losses
Income before income taxes and minority interests

140,569

Total income taxes

49,212

Income before minority interests

91,356

Minority interests

2,935

Net income

88,421— 14 —

881
881
114
—
391
506
141,538
52,062
89,476
4,640
84,836

Quarterly Consolidated Statement of Income
Three months ended 31 May(Millions of yen)Three months ended
31 May 2013
Net sales

Three months ended
31 May 2014

Cost of sales

270,972
130,992

Gross profit

139,979

Selling, general and administrative expenses

112,600

Operating income

27,379Non-operating income
Interest and dividend income
Foreign exchange gains
Others

151
6,757
335

Total non-operating income

7,243

Non-operating expenses
Interest expenses

157
190

Others348

Total non-operating expenses

34,274

Ordinary income

323,654
149,684
173,970
140,881
33,088
316
621
280
1,218
227
500
727
33,579Extraordinary gains
Gains on sales of non-current assets

48

Total extraordinary gains

48

Extraordinary losses
Loss on retirement of non-current assets
Expenses incurred upon acquisition

79
13
240

Others333

Total extraordinary losses
Income before income taxes and minority interests

33,989Total income taxes

10,385

Income before minority interests

23,603632

Minority interests

22,971

Net income— 15 —

2
2
42
—
134
176
33,405
12,21821,187908
20,279(3)Interim Consolidated Statement of Comprehensive Income

Nine months ended 31 May(Millions of yen)
Nine months ended
31 May 2013

Nine months ended
31 May 2014

91,35689,476

Foreign currency translation adjustments

10,629116,836
20,628

Total other comprehensive income

148,095

Income before minority interests
Other comprehensive income
Unrealised gains/(losses) on available-for-sale securities
Deferred gains/(losses) on hedges

Comprehensive income

239,452

1,735(9,095)
3,419(3,940)85,535Comprehensive income attributable to:Shareholders of FAST RETAILING CO., LTD.
Minority interests

232,598
6,853

80,2305,305— 16 —

Quarterly Consolidated Statement of Comprehensive Income
Three months ended 31 May(Millions of yen)Three months ended
31 May 2013

Three months ended
31 May 2014

23,603

21,187

Foreign currency translation adjustments

3,938
51,803
7,770

Total other comprehensive income

63,511

Income before minority interests
Other comprehensive income
Unrealised gains/(losses) on available-for-sale securities
Deferred gains/(losses) on hedges

Comprehensive income

87,115(198)(7,977)(189)(8,365)
12,821

Comprehensive income attributable to:Shareholders of FAST RETAILING CO., LTD
Minority interests

85,1401,974

11,3471,474— 17 —

(4)Interim Consolidated Statement of Cash Flows(Millions of yen)
Nine months ended
31 May 2013

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income taxes and minority interests

Nine months ended
31 May 2014

16,526
3,807
(879)
0
(4,268)(411)
400(13,032)250

141,538
21,5684,589
11
5(3,863)(643)
721(3,703)
114(20,031)(4,199)(23,738)
2,089

Others, net

10,813(1,804)
15,417(1,488)Subtotal

141,671

Interest and dividend income received
Interest paid
Income taxes paid
Income taxes refund

411
(324)
(50,954)
10,038Net cash from operating activities

100,842(3,272)(1,620)23,454(787)
156,463640(631)(53,223)
9,954
113,203(19,674)
169(3,535)(3,542)(30,306)
1,399(4,673)(4,182)

1,664(2,111)
1,286
39
(287)
(26,771)579(2,337)
1,459
178
(276)
—

Others, net(1,309)530

Net cash used in investing activities(53,541)(1,252)
96(39,314)140,569

Depreciation and amortisation
Amortisation of goodwill
Increase/(decrease) in allowance for doubtful accounts
Increase/(decrease) in provision for retirement benefits
Increase/(decrease) in other provisions
Interest and dividend income
Interest expenses
Foreign exchange losses/(gains)
Losses on retirement of non-current assets
Decrease/(increase) in notes andaccounts receivable — trade
Decrease/(increase) in inventories
Increase/(decrease) in notes andaccounts payable — trade
Decrease/(increase) in other assets
Increase/(decrease) in other liabilities

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Payments for lease and guarantee deposits
Proceeds from collection of lease andguarantee deposits
Increase in construction assistance fund receivables
Decrease in construction assistance fund receivables
Increase in guarantee deposits received
Decrease in guarantee deposits received
Acquisitions, net of cash acquired
Payments for purchase of shares of
consolidated affiliates— 18 —

(Millions of yen)
Note
CASH FLOWS FROM FINANCING ACTIVITIESNet increase/(decrease) in short-term loans payable
Additions to long-term loans payable
Repayment of long-term loans payable
Cash dividends paid
Cash dividends paid to minority interests
Repayments of lease obligations

Nine months ended
31 May 2013

Nine months ended
31 May 2014

(1,164)
15,602(6,107)(27,474)(891)(2,069)(130)

Others, net
Net cash used in financing activities
Effect of exchange rate changes oncash and cash equivalents(22,236)

Net increase/(decrease) in cash and cash equivalents

48,145

Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents fromnewly consolidated subsidiaries

266,020

CASH AND CASH EQUIVALENTS AT END OF PERIOD

23,0811*1— 19 —

314,168876—(2,351)(30,544)(633)(2,550)(571)(35,774)
4,078
42,193295,6221,204
339,020

Changes of Principal Subsidiaries and Application of the Equity Method of Accounting(1) Changes of principal subsidiaries
Since J BRAND Japan Co., Ltd. and Theory Holdings LLC were newly incorporated during the three months ended 30 November
2013, and since GU (Shanghai) Trading Co., Ltd., Comptoir des Cotonniers (Shanghai) Trading Co., Ltd. and PRINCESSE TAM. TAM(SHANGHAI) TRADING CO., LTD. commenced operations during the three months ended 30 November 2013 and had increased
in importance, and therefore they were consolidated during the period. Since LTH GmbH was liquidated during the threemonths ended 30 November 2013, it had been excluded from consolidation. Also, since FAST RETAILING UK LTD and J BRAND
EUROPE LTD were newly incorporated during the three months ended 28 February 2014, and since UNIQLO Pennsylvania
LLC, UNIQLO Massachusetts LLC and UNIQLO GLOBAL INNOVATION CENTER INC. (former UNIQLO Design Studio New York,
Inc) commenced operations during the three months ended 28 February 2014 and had increased in importance, therefore
they were consolidated during the period. In addition, as Theory HL Brentwood, Inc. was newly incorporated during the threemonths ended 31 May 2014, the importance of UNIQLO AUSTRALIA PTY LTD increased as it commenced operations during thisperiod, and therefore it is consolidated during the period. UNIQLO FRANCE S.A.S. is excluded from consolidation, following its
absorption-merger with UNIQLO EUROPE LIMITED (former UNIQLO (U.K.) LIMITED).
(2) Number of consolidated subsidiaries:
108(Change in accounting policy)
The Company previously calculated quarterly income tax expenses in the same method as applied for the year-end closing.
However, effective from the three-month period ended 28 February 2014, income tax expenses are calculated by reasonably
estimating the effective tax rate based on the expected income before income taxes and minority interests (net of the effects
of deferred taxes) for the fiscal year to which the nine-month period pertains, and multiplying income before income taxes andminority interests for the pertaining period by the estimated effective tax rate. Following the secondary listing on the Stock
Exchange of Hong Kong Limited, in the opinion of the directors, this change in the accounting policy enables the Group toprovide useful and timely information for a broad spectrum of users of the financial statements and their needs. This change
has not been applied retrospectively because its effect is minor.
(Specific accounting procedures adopted for preparation of interim consolidated financial statements)
Calculation of tax expenses:
Income tax expenses were calculated by reasonably estimating the effective tax rate based on the expected income before
income taxes and minority interests (net of the effects of deferred taxes) for the fiscal year to which the nine-month period
pertains and multiplying income before income taxes and minority interests for the pertaining period by the estimated effective
tax rate.

— 20 —

Notes to Interim Consolidated Financial Information
Note to Interim Consolidated Balance Sheet* 1 Allowance for doubtful accounts deducted directly from the carrying amount of assets:
As at 31 August 2013
(Millions of yen)78

Investments and other assets

As at 31 May 2014
(Millions of yen)76

Note to Interim Consolidated Statement of Cash Flows* 1 A reconciliation of cash and cash equivalents as stated in the interim consolidated balance sheet to the balance as stated in
the interim consolidated statement of cash flows is as follows:
Nine months ended
31 May 2013
Cash and deposits
Time deposits with maturities over three months
Cash equivalents included in short-term securities
Cash and cash equivalents— 21 —

Nine months ended
31 May 2014

(Millions of yen)
171,844(54)
142,378(Millions of yen)
223,227(181)
115,974

314,168

339,020

Notes to stockholders’ equity
I. For the nine months ended 31 May 2013
1. Dividends(1) Dividend paid during the nine months ended 31 May 2013:
Resolution

Type of shares

Total dividends Dividends per(Millions of yen) share (Yen)Record date

Effective date

Source ofdividends

Meeting of theBoard ofDirectors on
5 November
2012

Commonstock

13,241130

31 August 2012

26 November 2012

Retainedearnings

Meeting of theBoard ofDirectors on
11 April 2013

Commonstock

14,263140

28 February 2013

13 May 2013

Retainedearnings(2) Declaration date for dividend recorded during the nine months ended 31 May 2013 with an effective date in a following
period:Not applicable.
2. Significant changes in stockholders’ equity
Not applicable.
II. For the nine months ended 31 May 2014
1. Dividends(1) Dividend paid during the nine months ended 31 May 2014:
Resolution

Type of shares

Total dividends Dividends per(Millions of yen) share (Yen)Record date

Effective date

Source ofdividends

Meeting of theBoard ofDirectors on
4 November
2013

Commonstock

15,284150

31 August 201322 November 2013

Retainedearnings

Meeting of theBoard ofDirectors on
10 April 2014

Commonstock

15,286150

28 February 2014

12 May 2014

Retainedearnings(2) Declaration date for dividend recorded during the nine months ended 31 May 2014 with an effective date in a following
period:Not applicable.
2. Significant changes in stockholders’ equity
Not applicable.

— 22 —

Segment information
I. For the nine months ended 31 May 2013
1. Information about net sales, income or loss by reportable segments is as follows:(Millions of yen)
Reportable Segments
UNIQLO
Global Brands
UNIQLO Japan
International(Note 1)

Total

Others(Note 2)

Interim
Consolidated
Adjustments
Statement of(Note 3)
Income(Note 4)

Net sales

541,672

191,328

150,840

883,841

1,972—

885,814Segment income

88,343

19,624

13,446

121,414

101

2,521

124,037(Notes)

1.
2.
3.
4.

Effective from the three months ended 28 February 2013, J Brand (distribution of J BRAND’s clothing) is includedin the segment of Global Brands.
“Others” include real estate leasing business, etc.
“Adjustments” include amortisation of goodwill amounted to ¥3,807 million, which has not been allocated toindividual reportable segments.
Total segment income is adjusted to reconcile with operating income of the Interim Consolidated Statement of
Income.

2. Information about impairment losses on non-current assets and goodwill by reportable segments(Significant impairment losses on non-current assets)
Not applicable.
(Significant changes in goodwill)
Not applicable.
(Significant gain on negative goodwill)
Not applicable.
II. For the nine months ended 31 May 2014
1. Information about net sales, income or loss by reportable segments is as follows:(Millions of yen)
Reportable Segments
UNIQLOUNIQLO Japan
Global Brands
International

Total

Others(Note 1)

Interim
Consolidated
Adjustments
Statement of(Note 2)
Income(Note 3)

Net sales

569,488327,728

188,889

1,086,106

1,897

—

1,088,004

Segment income

94,80034,363

14,962

144,12654(7,888)136,292(Notes)1.
2.
3.

“Others” include real estate leasing business, etc.
“Adjustments” include amortisation of goodwill amounted to ¥4,589 million, which has not been allocated to
Individual reportable segments.
Total segment income is adjusted to reconcile with operating income in the Interim Consolidated Statement of
Income.

— 23 —

2. Information about impairment losses on non-current assets and goodwill by reportable segments(Significant impairment losses on non-current assets)
Not applicable.
(Significant changes in goodwill)
Not applicable.
(Significant gain on negative goodwill)
Not applicable.

— 24 —

Per share information
The basis for calculation of basic net income per share for the period and diluted net income per share for the period is asfollows:(1) Basic net income per share for the period (Yen)

Nine months ended
31 May 2013

Nine months ended
31 May 2014867.97832.5088,421

84,836(Basis of Calculation)
Net income (Millions of yen)
Net income not attributable to common stockholders (Millions of yen)
Net income attributable to common stockholders (Millions of yen)
Average number of common stock during the period (Shares)(2) Diluted net income per share for the period (Yen)——88,421

84,836

101,871,574

101,905,654

867.14

831.70——96,83098,137——(Basis of Calculation)
Adjustment to net income (Millions of yen)
Increase in number of common stock (Shares)
Significant changes in potential shares excluded from the computation ofdiluted net income per share for the period, because they do not have dilutive
effects— 25 —

2. Others
Dividends
The Company resolved to pay a dividend from retained earnings at the meeting of the Board of Directors convened on 10
April 2014.
The total amount of the dividend and amount per share are stated under “Financial section 1. Interim Consolidated
Financial Statements, Notes to stockholders’ equity”.

— 26 —

Report on Review of Interim Financial Information
Board of Directors
FAST RETAILING CO., LTD.
Introduction
We have reviewed the interim financial information included in the financial section, which comprises the interim consolidatedbalance sheet of FAST RETAILING CO., LTD. (the “Company”) and its subsidiaries (collectively, the “Group”) as at 31 May
2014 and the related interim consolidated statements of income and comprehensive income for the three-month and ninemonth period then ended, and interim consolidated statement of cash flows for the nine-month period then ended, and otherexplanatory notes (the “Interim Financial Information”).
The directors of the Company are responsible for the preparation and presentation of the Interim Financial Informationin accordance with generally accepted accounting principles for quarterly consolidated financial statements in Japan (the“JGAAP”). Our responsibility is to express a conclusion on the Interim Financial Information based on our review. Our reportis made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do notassume responsibility towards or accept liability to any other person for the contents of this report.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410 “Review of Interim Financial
Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on
Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Interim Financial Information is notprepared, in all material respects, in accordance with JGAAP.

Ernst & Young ShinNihon LLC
Tokyo, Japan
15 July 2014

— 27 —

SUMMARY OF MATERIAL DIFFERENCES BETWEEN INTERNATIONAL FINANCIAL REPORTING STANDARDS(“IFRSs”) AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN JAPAN (“JGAAP”)
The Interim Financial Information of the Group is prepared in accordance with JGAAP which differs in certain aspects from
IFRS. For the purpose of this summary, JGAAP refers to the accounting policies applied by the Group in preparing the Interim
Financial Information in accordance with the prevailing JGAAP for the nine months ended 31 May 2014. IFRS refers toInternational Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), International Financial
Reporting Standards Interpretations (“IFRICs”) and Standing Interpretations Committee Interpretations (“SICs”) that are
effective for annual financial period beginning on or after 1 September 2013.
This summary provides information about the differences between the Group’s JGAAP interim consolidated financial statements
and IFRS (net of tax) that, in the opinion of the directors, would have a material effect on total assets, total liabilities, total
equity (total net assets) and net income of the Group. This summary is prepared assuming 1 September 2010 as the dateof transition from JGAAP to IFRS, however, separate disclosure of the effects on the Financial Information of the Groupon transition to IFRS as would have been required under IFRS 1 “First-time Adoption of International Financial ReportingStandards”, is not provided.
Material quantifiable GAAP differences are summarised as follows:(Amounts in millions of Japanese Yen and are rounded down to the nearest million unless otherwise stated)
Notes

Total assets under JGAAPAs at 31 May 2014
(Millions of yen)
955,707

Material quantifiable effects for different accounting treatments:
Amortisation of goodwill
Impairment loss of goodwill
Changes of useful lives and method of depreciation of non-current assets
Amortisation of intangible assets
Employee benefits
Onerous contracts
Advertising and promotion expenditure
Consolidation — unconsolidated subsidiaries
Lease incentives

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(x)
(xi)

22,341
(550)
655
7,415
732
236
(627)
(21)
391

Forward currency contracts

(xii)

1,869

Total assets under IFRS as adjusted for the above material quantifiable effects— 28 —

988,148

NotesTotal liabilities under JGAAPAs at 31 May 2014
(Millions of yen)
320,628

Material quantifiable effects for different accounting treatments:
Changes of useful lives and method of depreciation of non-current assets
Employee benefits
Onerous contracts
Advertising and promotion expenditure
Consolidation — unconsolidated subsidiaries
Lease incentives

(iii)
(v)
(vi)
(vii)
(x)
(xi)

(14)
2,626
503
(153)
16
1,809

Forward currency contracts

(xii)

714

Total liabilities under IFRS as adjusted for the above material quantifiable effects

326,129

Notes

Total equity (total net assets) under JGAAPAs at 31 May 2014
(Millions of yen)
635,078

Material quantifiable effects for different accounting treatments:
Amortisation of goodwill
Impairment loss of goodwill
Changes of useful lives and method of depreciation of non-current assets
Amortisation of intangible assets
Employee benefits
Onerous contracts
Advertising and promotion expenditure
Consolidation — unconsolidated subsidiaries
Lease incentives

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(x)
(xi)

22,341
(550)
669
7,415
(1,894)
(266)
(474)
(37)
(1,418)Forward currency contracts

(xii)

1,155

Total equity (total net assets) under IFRS as adjusted
for the above material quantifiable effects

662,019— 29 —

NotesNine months ended
31 May 2014
(Millions of yen)

Net income for the period under JGAAP

84,836

Material quantifiable effects for different accounting treatments:
Amortisation of goodwill
Changes of useful lives and method of depreciation of non-current assets
Amortisation of intangible assets
Employee benefits
Onerous contracts
Advertising and promotion expenditure
Foreign currency financial instruments
Net investments in foreign operations
Consolidation — unconsolidated subsidiaries
Lease incentives

(i)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)

Forward currency contracts(xii)

Net income for the period under IFRS as adjusted
for the above material quantifiable effects

4,589
(207)
161
(468)
163
(165)
1,693
(1,282)
(424)
(295)
(255)

88,346

Notes:(i)

Amortisation of goodwill
Under JGAAP, goodwill is amortised using the straight-line method over an appropriate period (within 20 years).
Under IFRS, goodwill is not amortised but is subject to impairment review annually, or more frequently if events orchanges in circumstances indicate that it may be impaired, in accordance with IAS 36 “Impairment of Assets”. Detailed
information about impairment is described in the following note (ii).
Accordingly, the Group reversed the accumulated amortisation of goodwill recognised under JGAAP.

(ii)

Impairment loss of goodwill
Under JGAAP, goodwill is not reviewed for impairment unless there is an indication of impairment. If an indication of
impairment is identified, goodwill is allocated to the asset groups of the combined businesses to which it relates andany impairment is determined using a two-step approach. First, the entity estimates the sum of the undiscounted cash
flows expected to be generated by the asset groups of the multiple businesses to which the goodwill relates (the “Asset
Groups”) and any subsequent disposal value of the assets within that Asset Groups (the “total of the Asset Groups’ cash
flows”). Second, if the total of the Asset Groups’ cash flows on an undiscounted basis is less than the carrying amount of
the Asset Groups, an impairment loss is recognised. The amount of the impairment loss is measured as the excess of thecarrying amount of the Asset Groups over the total of the Asset Groups’ cash flows on a discounted basis. The reversal ofprevious impairments of goodwill is prohibited.
Under IFRS, goodwill is reviewed for impairment at least annually, at the same time each year, or more frequently if
events or changes in circumstances indicate that the carrying amount may be impaired. When the recoverable amount(the higher of fair value less disposal costs and value in use) of the cash-generating unit (“CGU”) (or group of CGUs),
including the goodwill, is less than the carrying amount of that CGU (or group of CGUs), including goodwill, an impairment
loss is recognised to the extent of the difference of the carrying amount of the CGU (or group of CGUs) over therecoverable amount. The reversal of previous impairments of goodwill is prohibited.

— 30 —

(iii)

Changes of useful lives and method of depreciation of non-current assets
In the Group’s JGAAP consolidated financial statements for the year beginning 1 September 2010, the prior year effect ofchanges in estimated useful lives of non-current assets were reflected in the balance of accumulated depreciation. In theyear of change, the carrying amount of non-current assets is recalculated based on the revised accounting estimates andthe impact thereof was recognised as non-recurring depreciation, an extraordinary loss in the consolidated statements ofincome. Generally, adjustments are only recognised for the assets whose useful lives are shortened.
Under IFRS, changes in useful lives and expected pattern of consumption of future economic benefits embodied indepreciable assets are accounted for as changes in accounting estimates. The reassessed useful lives are prospectively
applied as the depreciation basis of the corresponding non-current assets. Further, at the transition date, adjustments tothe carrying amount of non-current assets made in accordance with IFRS 1 are recognised in retained earnings.
The Group changed the estimated useful lives and depreciation method of non-current assets during the year ended 31
August 2011 and, as a result, the carrying amount of non-current assets decreased by JPY4,050 million. Under IFRS, aportion of the impact of the change under JGAAP corresponds to the transition date adjustment of non-current assets
to IFRS values and also under IFRS, the revision of useful lives applies to the extension of useful lives rather than justshortening thereof.

(iv)

Amortisation of intangible assets
Under JGAAP, there is no specific concept of intangible assets with indefinite useful lives. In principle, all intangible assets
are amortised over their determined useful lives using the straight-line method.
Under IFRS, intangible assets with indefinite useful lives are not amortised.
In accordance with IFRS, the amortisation of certain trademarks, which in substance are intangible assets with indefinite
useful lives, is reversed accordingly and these assets are tested for impairment on an annual basis. Impairment losses arerecognised as the excess of the carrying amount over the recoverable amount.

(v)

Employee benefits
Under JGAAP, accruals for employees’ unused accumulating paid holiday are not required.
Under IFRS, the accounting treatment for employees’ unused accumulating paid holiday is stipulated in IAS 19 “Employee
Benefits” and an entity shall accrue for the expected cost of employees’ unused accumulating paid holiday.
The Group accrued for employees’ unused accumulating paid holiday in accordance with IFRS.

(vi)

Onerous contracts
Under JGAAP, there are no specific guidelines on the accounting treatment for onerous contracts.
IFRS generally requires recognition of an onerous loss for all contracts if the unavoidable costs of meeting the obligations
under the contract exceed the economic benefits expected to be received under it. Unavoidable costs under a contract
are determined by considering the minimum cost to exit the contract, which is the lower of the cost of fulfilling it and any
compensation or penalties arising from the failure to fulfill it.
The Group made relevant assessments and recognised provisions for onerous contracts under IFRS.

— 31 —

(vii) Advertising and promotion expenditure
Under JGAAP, advertising and promotion costs are expensed based on the terms of the advertising contract or the
distribution of catalogues and others.
Under IFRS, advertising and promotion costs are expensed as incurred.
Deferred expenditure on advertising and promotion, which is recognised as an asset under JGAAP, is derecognised andexpensed as incurred under IFRS.
(viii) Foreign currency financial instruments
Under JGAAP, the total changes in fair value of available-for-sale securities including foreign exchange movements, net of
associated tax effects, are recognised in other comprehensive income. As an alternative treatment, the foreign exchange
gains or losses associated with available-for-sale debt securities may be recognised in the consolidated statement ofincome.
Under IFRS, the portion of the change in fair value of monetary available-for-sale securities arising from foreign exchange
movements is recognised as profit or loss in the consolidated statement of income.
The Group recognised the total change in fair value, including foreign exchange movements of available-for-sale debt
securities, in other comprehensive income under JGAAP. The portion of the change arising from foreign exchange
movements is reclassified to profit or loss in the consolidated statement of income under IFRS.
(ix)

Net investments in foreign operations
Under JGAAP, there is no specific accounting standard relating to the treatment of exchange differences arising on items,
other than shares, which are considered part of an entity’s net investment in a foreign operation. Accordingly, foreignexchange differences corresponding to such items are recognised in the consolidated statements of income of thereporting entity.
Under IFRS, exchange differences arising on the translation of an entity’s net investment (including shares and otheritems considered to represent equity) are recognised in other comprehensive income and accumulated as a separate
component of equity. On disposal of the foreign operation, all such exchange differences relating to that particularforeign operation are reclassified to the consolidated statements of income.
Accordingly, exchange differences arising from the net investment in foreign operations under JGAAP are adjusted toother comprehensive income under IFRS.

(x)Consolidation — unconsolidated subsidiaries
Under JGAAP, an entity that is controlled by its parent is, in principle, consolidated in the parent’s consolidated financial
statements. However, unconsolidated subsidiaries with insignificant assets and revenues, for which exclusion from thescope of consolidation does not affect the overall reasonableness of the financial position and operating results of theGroup, may be excluded from the scope of consolidation.
Under IFRS, a subsidiary that is controlled by its parent should be consolidated in the parent’s consolidated financial
statements.
Accordingly, such unconsolidated subsidiaries have been consolidated under IFRS.

— 32 —

(xi)Lease incentives
Under JGAAP, there is no specific guidance on the accounting treatment for lease incentives, such as a rent-free period.
Under IFRS, lease incentives shall be recognised by a lessee as part of the net consideration for the use of the leased asset
and amortised over the lease term on a straight-line basis.
The Group recognised the lease liabilities, net of any incentives received, and amortised these accordingly over the leaseterm on a straight-line basis under IFRS.

(xii) Forward currency contracts
Under JGAAP, the principle treatment of cash flow hedge accounting is the same as IFRS. Under the JGAAP optional
treatment for hedge accounting, foreign currency denominated receivables and payables are translated using the rates in
the related forward currency contracts (the “Assignment method”). The hedging transaction must match the settlement
dates of the foreign currency denominated receivables and payables and no deferred gains or losses are permitted onearly settlement of the hedging instruments.
Under IFRS, the Assignment method for hedge accounting under JGAAP does not exist. The effective portion of thegain or loss arising from changes in the fair value of a hedging instrument that meets the criteria for cash flow hedge
accounting is recognised directly in other comprehensive income. If the forward currency contracts expire, are sold,terminated or exercised, before the settlement dates of the corresponding hedged items, any cumulative gain or loss
previously recognised in other comprehensive income remains in other comprehensive income until the settlement of thecorresponding hedged items.
The Group adopts the Assignment method for entities which meet the criteria of hedge accounting under JGAAP.
Accordingly, the Group made the relevant adjustments.

— 33 —