J.FRONT RETAILING Integrated Report 2019 (Year ended February 28, 2019) Part 2 FINANCIAL DATA
Contents
Consolidated Financial Statements
02   Consolidated Statement of Financial Position

3) Consolidated Statement of Changes in Equity

4) Consolidated Statement of Cash Flows

Reporting Entity
1
J. FRONT RETAILING Co., Ltd. (the "Company") is the ultimate parent of the Company group (the "Group") and a company located in Japan. The registered address of its head office is Chuo-ku, Tokyo. The Company's consolidated financial statements for the fiscal year ended February 28, 2019 comprise the Company and its subsidiaries' interests in the Group's associates. For the Group's major business activities, please refer to "6. Segment Information."
Basis of Preparation
2
(1)Compliance with IFRS The consolidated financial statements of the Group have been prepared in compliance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board. Pursuant to the provisions of Article 93 of the "Ordinance on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements" (Ordinance of the Ministry of Finance No. 28 of 1976), the consolidated financial statements of the Group have been prepared in compliance with IFRS since the Company qualifies as a "Specified Company Complying with Designated International Accounting Standards" prescribed in Article 1-2 of the Ordinance. (2)Basis of measurement The Group's consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments, etc. measured at fair value as stated in "3. Significant Accounting Policies."
(3)Functional currency and presentation currency
The Group's consolidated financial statements are presented in Japanese yen, which is the Company's functional currency, and figures are rounded down to the nearest million yen.
(4)Changes in accounting policies
The Group has applied IFRS 15 Revenue from Contracts with Customers (issued in May 2014) and Clarifications to IFRS 15 (issued in April 2016) (collectively, "IFRS 15") from the current fiscal year, as stated in "3. Significant Accounting Policies."
Significant Accounting Policies
3
Significant accounting policies are applied consistently for all periods presented in these consolidated financial statements, except as otherwise provided.
(1)Basis of consolidation
1)Subsidiaries
Subsidiaries are entities controlled by the Group. Control means the power to govern the financial and operating policies of the entity so as to obtain benefits from its business activities. The financial statements of subsidiaries are included in the consolidated financial statements of the Group from the date when the Group gains control until the date when it ceases to control the subsidiary. In cases where the accounting policies applied by a subsidiary are different from those applied by the Group, adjustments are made to the subsidiary's financial statements, if necessary. All intergroup balances, transactions and unrealized gains or losses arising from transactions within the Group are eliminated in preparing the consolidated financial statements. When the Company retains control when there has been partial disposal of ownership interest in a subsidiary, the partial disposal is accounted for as an equity transaction. Any difference between the amount by which the non- controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity attributable to owners of the parent. The additional acquisition of non-controlling interests is accounted for as a capital transaction, and therefore no goodwill is recognized with respect to such transactions. Non-controlling interests in consolidated subsidiaries are identified separately from the Group's equity therein. Comprehensive income of subsidiaries is attributed to owners of the parent company and to the non-controlling interests even if this results in the non-controlling interests having a negative balance. When subsidiaries' fiscal year end is not the end of February, which is the fiscal year end of the Company, because the legal system of the region where the subsidiaries are located does not allow them to have the same fiscal year end as that of the Company, or for other reasons, adjustments are made by additionally preparing their financial statements as of the fiscal year end of the Company or other means.
2)Associates
An associate is defined as an entity over which the Group has significant influence on financial and operating policies but does not have control. Associates are recognized at cost at the time of the acquisition, and are accounted for by the equity method thereafter. Goodwill recognized on acquisition (less accumulated impairment) is included in investments in associates. In cases where the accounting policies applied by an associate are different from those applied by the Group, adjustments are made to the associate's financial statements, if necessary. For associates whose fiscal year end is not the end of February, which is the fiscal year end of the Company, due to relationships with other shareholders or other reasons, adjustments are made by additionally preparing their financial statements as of the fiscal year end of the Company or other means.
3)Joint control
A joint arrangement is a contractual arrangement of which two or more parties have joint control. The Group classifies its involvement in joint arrangements as joint operations (when the Group has rights to assets and assumes obligations for liabilities in association with the arrangement) and joint ventures (when the Group only has rights to net assets of the arrangement), depending on rights and obligations of the parties to the arrangement. In the case of joint operations, the Group recognizes its own assets, liabilities, income and expenses as well as the amount equivalent to its share when the Group jointly holds or assumes them. Joint ventures are recognized at cost at the time of the acquisition and are subsequently accounted for using the equity method.
(2)Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the acquisition date fair value of the assets transferred, liabilities assumed and equity instruments issued by the Company in exchange for control of the acquiree. Any excess of the consideration transferred over the fair value of identifiable assets and liabilities is recognized as goodwill in the consolidated statement of financial position. Conversely, any deficit is immediately recognized as income in the consolidated statement of income. The Group elects to measure non-controlling interests at fair value, or at the proportionate share of the recognized amounts of identifiable net assets, on a transaction-by- transaction basis. Acquisition-related costs are expensed as incurred.
(3)Foreign currency translation
1)Foreign currency transactions Each entity of the Group has set its own functional currency as the currency of the primary economic environment in which the entity operates. Transactions of each entity are measured at the functional currency. When each entity prepares non-consolidated financial statements, transactions in currencies other than its functional currencies are translated using the exchange rate prevailing at the dates of transactions. Foreign currency monetary assets and liabilities at the end of the reporting period are translated using exchange rates at the end of the reporting period. Exchange differences arising from translation or settlement are recognized as profit or loss. However, when gains or losses on non-monetary items are recorded in other comprehensive income, exchange differences are also recorded in other comprehensive income.
2)Financial statements of foreign subsidiaries and
associates
Assets and liabilities of foreign subsidiaries and associates are translated into Japanese yen at the exchange rate prevailing at the end of the reporting period. Income and expenses of foreign subsidiaries and associates are translated into Japanese yen at the average exchange rate for the period, unless there is significant change in the exchange rate during the period. When there is significant change in the exchange rate, the income and expenses are translated using the exchange rate at the transaction date. Exchange differences arising from translation of the financial statements of foreign subsidiaries and associates are recognized in other comprehensive income. Exchange differences for foreign subsidiaries and associates are recognized as profit or loss in the period during which the foreign subsidiaries and associates are disposed of.
(4)Financial instruments
1)Non-derivative financial assets Trade and other receivables are initially recognized on the date when they are incurred. All other financial assets are initially recognized on the trade date when the Group becomes a party to the contractual provisions of the financial instruments. An overview of classification and measurement model of non-derivative financial assets is as follows.
(i)Financial assets measured at amortized cost
With regard to investments in debt instruments, when the contractual cash flows consist of principal and interest paid on specified dates, and the Group holds such investments based on a business model whose objective is to hold the instrument to collect contractual cash flows, the debt instruments are measured at amortized cost. Transaction cost directly attributable to acquisition of financial assets measured at amortized cost is included in the amount of initial measurement. After initial recognition, amortization cost is measured using the effective interest method, and impairment losses are deducted where necessary. Interest revenue, foreign exchange gains and losses and impairment losses on financial assets measured at amortized cost are recognized in profit or loss. (ii)Financial assets measured at fair value through other comprehensive income (financial assets at FVTOCI) With regard to investments in debt instruments, when the contractual cash flows consist of principal and interest paid on specified dates, and the Group holds such investments based on a business model whose objective is both to collect contractual cash flows and to sell the financial assets, the debt instruments are measured at fair value. In this case, interest revenue, foreign exchange gains and losses and impairment losses measured using the effective interest method are recognized in profit or loss, and changes in the fair value excluding them are recognized in other comprehensive income. The cumulative amount recognized in other comprehensive income as at the time of derecognition of the financial asset is reclassified to profit or loss. For investments in equity instruments that are not held for sale, the Group may make an irrevocable election at initial recognition to measure them at fair value and recognize any changes in the fair value in other comprehensive income. In this case, changes in the fair value are recognized in other comprehensive income (not reclassified to profit or loss). The cumulative amount recognized as other comprehensive income is transferred to retained earnings when the financial asset is derecognized. Dividends are recognized in profit or loss unless they obviously represent a partial recovery of the cost of the investment. Transaction cost directly attributable to acquisition of financial assets at FVTOCI is included in the amount of initial measurement. (iii)Financial assets measured at fair value through profit or loss (financial assets at FVTPL) Financial assets other than the above are measured at fair value with changes in fair value recognized in profit or loss. Transaction cost directly attributable to acquisition of financial assets at FVTPL is recognized in profit or loss as incurred. The Group does not designate any debt instrument as measured at fair value through profit or loss to eliminate or significantly reduce an accounting mismatch.
(iv)Impairment of financial assets
The Group recognizes impairment of debt instruments measured at amortized cost or at fair value through other comprehensive income based on its evaluation at the end of each reporting period of whether there has been a significant increase in credit risk of financial assets or groups of financial assets since initial recognition. Specifically, when there has been no significant increase in the credit risk since initial recognition, 12-month expected credit losses are recognized as allowance for credit losses. On the other hand, when there has been a significant increase in credit risk since initial recognition, lifetime expected credit losses of the financial assets are recognized as allowance for credit losses. Whether credit risk has significantly increased or not is determined based on changes in default risk. For trade receivables arising from the ordinary course of business of the Group, since the period up to the collection is short, expected credit losses of such trade receivables are recognized over their remaining lives from the inception simply based on historical credit loss experience.
(v)Derecognition of financial assets
The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or the contractual rights to receive cash flows from the financial asset are transferred in a transaction where substantially all the risks and rewards incidental to ownership of the financial asset are transferred. Any interests in transferred financial assets that are created or continuously retained by the Group are recognized as a separate asset or liability.
2)Non–derivative financial liabilities
The Group recognizes financial liabilities at the date of transaction when the Group becomes a party to the contract for the financial instrument. The Group derecognizes a financial liability when the financial liability is extinguished, i.e. when the contractual obligation is discharged or cancelled or expires. The Group principally has borrowings, bonds, trade payables, other short-term payables, common gift certificates for department stores nationwide, deposits received, etc. as non-derivative financial liabilities. These financial liabilities are initially recognized at fair value and subsequently measured at amortized cost based on the effective interest method.
3)Presentation of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial position only when the Group has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
4)Derivatives and hedge accounting
The Group uses derivatives to hedge interest rate fluctuation risk and foreign exchange fluctuation risk. Derivatives used by the Group primarily include forward exchange contracts and interest rate swaps. At the time of initial designation of the hedge, the Group documents the relationship between the hedging instrument and the hedged item, the risk management objective, the strategy for implementation of the hedge transaction, the hedging instrument and the hedged item, the nature of hedged risk, the method for assessing effectiveness of the hedge relationship and the method of measuring the effective portion and ineffective portion. The Group assesses whether the hedging instrument is expected to be highly effective in achieving offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk throughout the period for which the hedge is designated, at the inception of the hedge and on an ongoing basis. To apply cash flow hedges to forecast transactions, the forecast transaction must be highly probable. Derivatives are initially recognized at fair value and the transaction costs are recognized in profit or loss as incurred. After initial recognition, derivatives are measured at fair value, and any changes in the fair value are accounted for as follows.
(i)Cash flow hedges
When a derivative is designated as a hedging instrument to hedge changes in cash flows attributable to certain risks related to highly likely forecast transactions that could affect recognized assets and liabilities or profit or loss, the effective portion of the hedge in changes in fair value of the derivative is included in other components of equity as "cash flow hedges." The balance of cash flow hedges is deducted from other comprehensive income in the consolidated statement of comprehensive income and transferred to profit or loss under the same item as the hedged item in the same period as the period in which cash flows of the hedged item affect profit or loss. The ineffective portion of the hedge in changes in fair value of the derivative is immediately recognized in profit or loss. When the hedge no longer meets the criteria for hedge accounting, the hedging instrument expires or is sold, terminated or exercised, or the designation of the hedge is revoked, the application of hedge accounting, is discontinued prospectively. If hedge accounting is discontinued, the Group continues to record the balance of cash flow hedges that have already been recognized in other comprehensive income until the forecast transaction affects profit or loss. When forecast transactions are no longer expected to occur, the balance of cash flow hedges is immediately recognized in profit or loss. (ii)Fair value hedges Changes in fair value of derivatives that are hedging instruments are recognized in profit or loss. Carrying amounts of hedged items are measured at fair value. For gains or losses on hedged items attributable to hedged risk, any changes in the fair value are recognized in profit or loss.
(5)Cash and cash equivalents
Cash and cash equivalents consist of cash, demand deposits, and short-term investments with maturities of three months or less from the date of acquisition that are readily convertible to cash and subject to insignificant risk of change in value.
(6)Inventories
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. The acquisition cost is calculated mainly using the specific identification method, and includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition.
(7)Assets held for sale
If the carrying amounts of non-current assets are recovered principally through a sale transaction rather than through continuing use, these assets (or disposal groups) are classified under "assets held for sale." The condition for classifying an asset under "assets held for sale" is only met by an asset whose sale is highly probable and which is available for immediate sale in its present condition. Management must have committed to the execution of a sale plan for that asset, and the sale of the asset must be scheduled to be completed within one year from the day it is classified as an asset held for sale. An asset held for sale is measured at the lower of its carrying amount and fair value less cost to sell. After property, plant and equipment, intangible assets and investment property have been classified under "assets held for sale," depreciation or amortization will not be applied to these assets. (8)Property, plant and equipment Property, plant, and equipment is measured using the cost model and is carried at cost less accumulated depreciation and accumulated impairment. The acquisition cost includes costs directly attributable to the acquisition of the asset, costs related to disassembly, retirement and site restoration, and borrowing costs that should be capitalized. Depreciation of assets other than land and construction in progress is recognized using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of major components of property, plant and equipment are as follows: •  Buildings and structures 3 to 50 years 2 to 20 years •  Machinery and vehicles • Furniture and fixtures 2 to 20 years The estimated useful lives, depreciation methods, etc. are reviewed at the end of the fiscal year, and if there are any changes made, those changes are applied prospectively as a change in an accounting estimate.
(9)Goodwill
The Group measures goodwill at the amount calculated by deducting the net recognized amount (usually, fair value) of identifiable assets acquired and liabilities assumed at the date of acquisition from the fair value of the consideration for the transfer including the recognized amount of non-controlling interests in the acquiree, which is measured at the date of acquisition. Goodwill is not amortized. Instead, it is tested for impairment annually, or whenever there are indications of impairment. Impairment losses of goodwill are recognized in the consolidated statement of income, and not reversed subsequently. In addition, goodwill is carried at cost less accumulated impairment on the consolidated statement of financial position.
(10)Intangible assets
Intangible assets are measured using the cost model and stated at cost less accumulated amortization and accumulated impairment. Intangible assets acquired separately are measured at cost at initial recognition. After initial recognition, intangible assets other than goodwill are amortized using the straight-line method over respective estimated useful lives, except for intangible assets with indefinite useful lives. Estimated useful lives of major intangible assets are as follows. In addition, the Group has no intangible assets with indefinite useful lives. • Software
5 years
The estimated useful lives, residual values and amortization methods are reviewed at the end of the fiscal year, and if there are any changes made, those changes are applied prospectively as a change in an accounting estimate.
(11)Leased assets
Leases are classified as finance leases whenever substantially all the risks and rewards incidental to ownership of leased assets are transferred to the Group under the contract. All other leases are classified as operating leases. In finance lease transactions, leased assets are recorded in the consolidated statement of financial position at the lower of the fair value of the leased property or the present value of the aggregated minimum lease payments, each determined at the inception of the lease. Leased assets are depreciated over the shorter of their estimated useful lives or the lease term. Lease payments are apportioned between the interest expense based on the interest method and the payment of the lease obligations, and interest expense is recognized in the consolidated statement of income. Lease payments under an operating lease are recognized as an expense using the straight-line method over the lease term in the consolidated statement of income. In addition, contingent rent is recognized as an expense in the period in which it is incurred. Determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement, in accordance with IFRIC 4, Determining whether an Arrange- ment contains a Lease, even if the arrangement does not take the legal form of a lease from the standpoint of the law.
(12)Investment property
Investment property is property held to earn rentals or for capital appreciation or both. Investment property is measured using the cost model and stated at cost less accumulated depreciation and accumulated impairment (For the depreciation method and useful lives, please refer to "(8) Property, plant and equipment"). When the investment property portion of a property cannot be accounted for separately from other portions of a property, the entire property is accounted for as investment property only if the owner-occupied portion is insignificant.
(13)Impairment of non-financial assets
The Group determines at the end of every reporting period whether there is any indication that carrying amounts of the Group's non-financial assets excluding inventories and deferred tax assets may be impaired. If any indication exists, the recoverable amount of the asset is estimated. For goodwill and intangible assets that have indefinite useful lives or not yet available for use, the recoverable amount is estimated at the same time each year. The recoverable amount of an asset or a cash-generating unit is the larger of its value in use and fair value less cost of disposal. In calculating value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects the time value of money and the risks specific to the asset. The cash- generating unit is the smallest group of assets that generates cash inflows, from continuous use, that are largely independent of the cash inflows from other assets or groups of assets. To test goodwill for impairment, cash-generating units to which the goodwill is allocated are integrated so that impairment is tested reflecting the smallest unit related to the goodwill. Goodwill acquired in a business combination is allocated to cash-generating units that are expected to benefit from the synergies of the combination. Since the Group's corporate assets do not generate independent cash inflows, the recoverable amount of cash- generating units to which the corporate assets are attributed is determined if there is any indication that corporate assets are impaired. An impairment loss is recognized as profit or loss if the carrying amount of an asset or cash-generating unit exceeds the recoverable amount. The impairment loss recognized in association with a cash-generating unit is first allocated to reduce the carrying amount of goodwill allocated to this unit, and then the carrying amounts of other assets in the cash-generating unit are reduced on a pro rata basis. Impairment losses related to goodwill are not reversed. With regard to other assets, for previously recognized impairment losses, the Group assesses whether there is any indication that the loss may have decreased or may no longer exist at the end of each reporting period. An impairment loss is reversed when there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed up to the carrying amount that would have been determined had no impairment loss been recognized, net of necessary depreciation and amortization.
(14)Employee benefits
The Group has established defined benefit plans (such as a corporate pension fund plan and lump-sum retirement benefit plan) as employee retirement benefit plans, and certain consolidated subsidiaries have adopted defined contribution plans. The projected unit credit method is used to determine the present value of defined benefit obligation, related current service cost and past service cost. The discount rate is determined by reference to market yields at the end of the fiscal year on high quality corporate bonds corresponding to the discount period established based on the period to the date when the future benefits for each fiscal year are to be paid. Net defined benefit liability or asset is determined as the present value of defined benefit obligation less the fair value of plan assets. Remeasurements of net defined benefit liability or asset are recognized as other comprehensive income and immediately transferred from other components of equity to retained earnings. Remeasurements consist of actuarial gains and losses on defined benefit obligation, return on plan assets (excluding the amount of interest revenue on plan assets) and others. Past service costs are immediately accounted for as profit or loss. Costs for defined contribution benefits are recognized as expenses when the contributions are made.
(15)Share-based payment
The Company has adopted an officer remuneration BIP (Board Incentive Plan) trust (hereinafter referred to as the "BIP Trust") as a performance-linked, share-based payment to ensure steady execution and progress of the Medium-term Business Plan. The BIP Trust is a system of granting the Company's shares to officers (in certain cases, the Company's shares are converted into cash within the trust and cash in the amount equivalent to their conversion value is paid) in accordance with the officers' rank and level of achievement of the Medium-term Business Plan, etc. The consideration for the services received is calculated using the fair value of the Company's shares on the grant date. This value is expensed over the vesting period from the grant date, and a corresponding amount is recognized as an increase in equity.
(16)Provisions
A provision is recognized when the Group has a present legal or constructive obligation as a result of a past event, when it is probable that an outflow of financial resources will be required to settle the obligation and when a reliable estimate can be made of the amount of the obligation. To determine the amount of a provision, when the effect of the time value of money is material, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects the time value of money and the risks specific to the liability. Unwinding of the discount over time is recognized in finance costs. Asset retirement obligations Asset retirement obligations are recorded at the estimated amount of restoration costs for leased stores, offices, etc. for which the Group has obligations to restore them to the original state at the time when the lease is terminated. Provision for loss on business liquidation Legal or constructive obligations are recorded for the cost of store dismantlement, etc. that is expected to be borne in the future as a result of business liquidation, store closure and store rebuilding.
(17)Sales revenue
The Group has applied IFRS 15 Revenue from Contracts with Customers (issued in May 2014) and Clarifications to IFRS 15 (issued in April 2016) (collectively, "IFRS 15") from the current fiscal year. In applying IFRS 15, the Group has adopted a method recognized as a transitional measure under which cumulative effects from the adoption of standards are recognized on the initial application date. With the application of IFRS 15, based on the following five-step approach, revenue is recognized as the amount of consideration to which the Group expects to be entitled in exchange for the transfer of goods or services promised to customers. Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when the entity satisfies a performance obligation The Group, under a holding company structure, develops businesses such as the PARCO Business, Real Estate Business and Credit Finance Business, with the Department Store Business at its core. The Department Store Business carries out the sale of clothing, general goods, household goods, food products and others. With regard to these sales of goods, since performance obligations are deemed to be satisfied at the time of delivery of goods when customers gain control of such goods, the Group mainly recognizes revenue at the time of delivery of such goods. Furthermore, revenue is measured at the amount of consideration promised in contracts between customers, less any discounts, rebates and sales returns, etc. Effects of application of standards on the Group In the Group, primarily the Department Store Business and PARCO Business operate a Customer Loyalty Program which provides customers with point rewards that can be exchanged for discounts on future purchases. Although under IAS 18 Revenue , revenue was recognized less the estimated fair value of such point rewards, under IFRS 15, in accordance with the above five-step approach, transaction price is allocated to point rewards and goods on a relative stand-alone selling price basis. When adopting this method, the amount allocated to goods sold, on average, is higher than the amount less the fair value of point rewards. Consequently, in comparison with application of the previous accounting standard, at the beginning of the current fiscal year, other current liabilities and deferred tax assets decreased by ¥705 million and ¥107 million, respectively, and retained earnings and deferred tax liabilities increased by ¥487 million and ¥111 million, respectively. Please note that the impact on earnings of the current fiscal year is not significant.
1)Revenue recognition by business segment
i)Department Store Business
The Department Store Business carries out the sale of clothing, general goods, household goods, food products and others. With regard to these sales of goods, since performance obligations are deemed to be satisfied at the time when goods are delivered to customers, the Group recognizes revenue at the time of delivery of such goods. Payments for goods are received at the time of delivery of the goods, which is the time when the performance obligation is satisfied.
ii)PARCO Business
The PARCO Business operates the shopping center business, in which it undertakes development, management, supervision and operation of shopping centers; the specialty store business, in which it sells personal belongings, general goods and others; the space engineering and management business, in which it undertakes design, operation, etc. of interior decorating work; and other businesses. With regard to services in the shopping center business, because these services are provided on a continuous basis and thus performance obligations are deemed to be satisfied over a certain period of time, revenue is recognized as the services are rendered. With regard to the sale of personal belongings, general goods and others, since performance obligations are usually deemed to be satisfied at the time when goods are delivered to customers, revenue is recognized at the time of delivery of such goods. Payments for goods are received at the time of delivery of the goods, which is the time when the performance obligation is satisfied. With regard to the design and operation of interior decorating work in the space engineering and management business, if the outcome of a work contract can be estimated reliably, revenue is recognized according to the stage of completion of the performance obligation. If the outcome of a work contract cannot be estimated reliably, revenue is recognized only to the extent that it is probable that the contract costs incurred will be recoverable.
iii)Real Estate Business
The Real Estate Business carries out development of the Group's own properties located mainly in areas surrounding each store of Daimaru Matsuzakaya Department Stores, expansion of rental space by leasing and acquiring external properties, management and operation of such properties, and others. Revenue from lease of real estate and others is recognized in the period in which it is earned, in accordance with IAS 17.
iv)Credit Finance Business
The Credit Finance Business undertakes issuance and administration of credit cards. In the Credit Finance Business, annual membership fees from cardholders, fees from department stores and external affiliated stores, and interest from installment sales are recognized as revenue.
2)Interest revenue
Interest revenue is recognized using the effective interest method. 3)Dividends Divided income is recognized when the right to receive dividends is established.
4)Gross and net presentation of revenue
When the Group conducts transactions as a principal, revenue is presented at the gross amount of consideration received from customers. When the Group conducts transactions as an agent for the benefit of a third party, revenue is presented at the net amount calculated by deducting the amount collected for the benefit of the third party from the gross amount of consideration received from customers. The following indicators are taken into account in the determination of whether the Group conducts a transaction as a principal or an agent: • Whether the entity is primarily responsible for fulfilling a contract • Whether the entity has inventory risk before or after the customer order, during shipping or on return • Whether the entity has discretion in establishing prices
(18)Government grants
Government grants are measured and recognized at fair value, if the conditions attaching to them are complied with, and there is reasonable assurance that the grants will be received. Grants for expenses incurred are recorded as income in the same fiscal year as the fiscal year in which the expenses are incurred. Grants related to acquisition of an asset are recorded as other operating income on a systematic basis over the useful life of the asset, and unearned government grants are recorded in liabilities as deferred income.
(19)Income tax
Income tax consists of current taxes and deferred taxes. Income tax is recognized as profit or loss, except for taxes related to business combinations and taxes related to items that are recognized directly in equity or in other comprehensive income.
1)Current taxes
Current taxes are measured in the amount of the expected tax payables to or receivables from the taxation authorities. Calculation of the amount of tax is based on the tax rates and tax laws enacted or substantively enacted by the end of the reporting period in countries where the Group conducts business and earns taxable
profit.
2)Deferred taxes Deferred taxes are recognized for temporary differences between the carrying amounts of assets or liabilities in the statement of financial position and its tax base, and for unused tax losses and unused tax credits. No deferred tax assets and liabilities are recognized on the following temporary differences: • Temporary differences arising from the initial recognition of goodwill • Temporary differences arising from initial recognition of assets and liabilities from transactions that are not business combinations and affect neither accounting income or taxable profit • Taxable temporary differences associated with investments in subsidiaries and associates for which the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future A deferred tax liability is recognized for all taxable temporary differences in principle, and a deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Carrying amount of deferred tax assets is reassessed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to use all or part of the benefit of the deferred tax assets. Unrecognized deferred tax assets are reassessed each period and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. Deferred tax assets and liabilities are measured at the tax rates and by the tax laws that are expected to apply to the period when the assets are realized or the liabilities are settled, based on the statutory tax rates and tax laws enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to offset current tax assets against tax liabilities and income taxes are levied by the same taxation authority on the same taxable entity.
(20)Earnings per share
Basic earnings per share are calculated by dividing profit (loss) attributable to ordinary equity holders of the parent entity by the weighted average number of shares outstanding during the period, adjusting treasury shares. Diluted earnings per share are calculated by adjusting for the effects of all dilutive potential shares.
(21)Operating segments
Operating segments are components of entities that engage in business activities that earn revenue and incur costs including transactions with other operating segments. Operating results of all the operating segments, for which the financial information is separately available, are reviewed periodically by the Board of Directors for the purpose of allocating management resources to each segment and assessing performance.
4
Significant Accounting Estimates and Judgments
In the preparation of consolidated financial statements, management is required to make judgments, estimates and assumptions that affect application of accounting policies as well as amounts of assets, liabilities, revenue and expenses. Actual results may differ from these estimates. The estimates and their underlying assumptions are reviewed on an ongoing basis. The effects of changes in accounting estimates are recognized in the fiscal period in which the estimates are changed and in future periods that are affected. Estimates and judgments made by management that significantly affect the amounts in the consolidated financial statements are as follows.
(1)Property, plant and equipment, goodwill, intangible assets
and investment property
The Group conducts impairment tests if there is an indication that property, plant and equipment, goodwill, intangible assets and investment property may be impaired. Impairment tests are performed by comparing the carrying amount and the recoverable amount of the asset. If the recoverable amount is less than the carrying amount, an impairment loss is recognized. In calculating the recoverable amount, the Group estimates the discounted present value of future cash flows generated from use of the asset and the discounted present value of future cash flows generated from ultimate disposal of the asset. These estimates are based on management's best estimates, but may differ from actual
(22)Treasury shares
Treasury shares are assessed at acquisition cost and deducted from equity. No gain or loss is recognized on the purchase, sale or cancellation of the Company's treasury shares. Any difference between the carrying amount and consideration received on the sale of treasury shares is recognized as share premium.
(23)Borrowing costs
The Group includes borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, that is, a qualifying asset as part of the acquisition cost until the asset is substantially ready for its intended use or sale. All borrowing costs other than those above are recognized as profit or loss in the fiscal period in which they are incurred. results due to effects of changes in uncertain future economic conditions.
(2)Useful lives of property, plant and equipment and
investment property
The useful lives of property, plant and equipment and investment property are reviewed at the end of the fiscal year, and if any changes are required, those changes are applied prospectively as a change in an accounting estimate. If revisions to the useful lives become necessary, such revisions could have a material effect on the amounts recognized in the consolidated financial statements in the next fiscal year and beyond.
(3)Recoverability of deferred tax assets
The Group recognizes deferred tax assets to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized, and the judgment of the recoverability is made on the basis of an estimate of taxable profit for each future fiscal year determined based on the Group's business plan. The estimate of taxable profit for future fiscal years may be affected by changes in uncertain future economic conditions.
(4)Provisions
The Group recognizes asset retirement obligations and provision for loss on business liquidation as provisions in the consolidated statement of financial position. The amount recognized as provisions is estimated based on best estimates which take into account historical and other information on the reporting date for expenditures necessary to settle current obligations, but may differ from actual results.
(5)Post-employment benefits
The Group has defined benefit and defined contribution post-employment benefit plans for employees and retirees. 5
Accounting Standards That Have Been Published but Not Yet Applied
Present value of defined benefit obligations, service costs and others are determined based on various actuarial assumptions. For actuarial assumptions, a variety of factors, such as discount rates, future payment of salaries, those who withdraw from the plan in the future and life expectancy of members, are estimated. These estimates are made based on management's best estimates, but may differ from actual results due to effects of changes in uncertain future economic conditions and amendment or promulgation of relevant laws and regulations. Accounting standards and interpretations newly established or revised by the approval date of the consolidated financial statements but not early applied by the Group are primarily as follows.
The application of IFRS 16 requires a lessee not to classify leases as finance leases and operating leases, but to recognize right-of-use assets, which represent the rights to use underlying assets, and lease liabilities, which represent the obligations to make lease payments, for all leases, except for leases with a short lease term and leases with low-value underlying assets. After the right-of-use assets and the lease liabilities are recognized, a lessee records depreciation on the right-of-use assets during the lease term and interest expense for the lease liabilities. The major effects of this accounting treatment on the Group's consolidated financial statements are as follows. The Group estimates increases in assets and liabilities by approximately ¥214 billion and approximately ¥228 billion, respectively, and a decrease in equity by approximately ¥14 billion in the consolidated statement of financial position as at the beginning of the fiscal year ending February 29, 2020. Please note that the impact on profit is estimated to be insignificant in the consolidated statement of income.
6
Segment Information
(1)Overview of reportable segments
The reportable segments of the Group are constituent units of the Group for which separate financial information is obtainable. These segments are periodically examined by the Board of Directors for the purpose of deciding the allocation of management resources and evaluating business results. The Group is comprised, under a holding company structure, of the reportable segments "Department Store Business," "PARCO Business," "Real Estate Business" and "Credit Finance Business," with the Department Store Business at its core. The Department Store Business carries out the sale of clothing, general goods, household goods, food products and others. The PARCO Business undertakes development, management, supervision and operation of shopping centers. The Real Estate Business carries out development, supervision, operation, etc. of real estate. The Credit Finance Business undertakes issuance and administration of credit cards.
(2)Segment revenue and business results
Revenue and business results by reportable segments of the Group are as follows. Inter-segment transactions are generally based on prevailing market prices.
manufacture and sale of furniture, parking, leasing, etc. 2. Capital expenditures are the amount of the increase in property, plant and equipment, investment property and intangible assets. 3. Adjustments are made as follows. (1)The adjustment for segment profit includes an inter-segment elimination and corporate income and expenses not attributable to any reportable segment. Corporate income and expenses are mainly income and expenses of the company submitting consolidated financial statements that are not attributable to any reportable segment. (2)The adjustment for segment assets includes elimination of segment receivables, unrealized adjustments on non-current assets, and assets of the company submitting consolidated financial statements that are not attributable to any reportable segment. (3)The adjustment for depreciation consists of inter-segment transfers. (4)The adjustment for impairment loss consists of impairment loss of the company submitting consolidated financial statements that are not attributable to any reportable segment. (5)The adjustment for amounts invested in entities accounted for using equity method consists of investments accounted for using equity method of the company submitting consolidated financial statements that are not attributable to any reporting segment. (6)The adjustment for capital expenditures consists mainly of inter-segment unrealized profit. Segment profit is adjusted to operating profit in the consolidated financial statements. 4.
manufacture and sale of furniture, parking, leasing, etc. 2. Capital expenditures are the amount of the increase in property, plant and equipment, investment property and intangible assets. 3. Adjustments are made as follows. (1)The adjustment for segment profit includes an inter-segment elimination and corporate income and expenses not attributable to any reportable segment. Corporate income and expenses are mainly income and expenses of the company submitting consolidated financial statements that are not attributable to any reportable segment. (2)The adjustment for segment assets includes elimination of segment receivables, unrealized adjustments on non-current assets, and assets of the company submitting consolidated financial statements that are not attributable to any reportable segment. (3)The adjustment for depreciation consists of inter-segment transfers. (4)The adjustment for amounts invested in entities accounted for using equity method consists of investments accounted for using equity method of the company submitting consolidated financial statements that are not attributable to any reporting segment. (5)The adjustment for capital expenditures consists mainly of inter-segment unrealized profit. 4. Segment profit is adjusted to operating profit in the consolidated financial statements.
(Adoption of IFRS 15 Revenue from Contracts with Customers)
The Group has applied IFRS 15 from the current fiscal year, as stated in "3. Significant Accounting Policies." Since cumulative effects of the initial application were recognized as an adjustment to the opening balance of retained earnings for the current fiscal year in accordance with the transitional measure, information for the previous fiscal year has not been restated.
(3)Information by geographical area
Sales revenue from external customers This information has been omitted, as sales revenue from external customers in Japan accounts for a large percentage of sales revenue recorded on the consolidated statement of income.
Non-current assets
This information has been omitted, as the amount of non- current assets located in Japan accounts for a large percentage of the amount recorded on the consolidated statement of financial position.
Cash and Cash Equivalents
7
The breakdown of cash and cash equivalents is as follows:

Trade and Other Receivables
8
The breakdown of trade and other receivables is as follows. All these receivables have been classified as financial assets measured at amortized cost.
9
Inventories
The breakdown of inventories is as follows:
The amount of inventories that were recognized as expenses and included in cost of sales was ¥246,401 million in the fiscal year ended February 28, 2018 and ¥235,566 million in the fiscal year ended February 28, 2019. The amounts of write-down of inventories recognized as expenses are as follows:

Other Financial Assets
10
The breakdown of other financial assets is as follows:

Assets Held for Sale
11
The breakdown of assets held for sale is as follows:
Assets held for sale were shares of Senshukai Co., Ltd. With regard to the assets, because the carrying amount exceeded the fair value less costs to sell as of February 28, 2018, an impairment loss of ¥1,617 million was recorded. The sale of the assets was completed in May 2018, and loss on sale of investments in subsidiaries and associates of ¥3 million was recorded as "other operating expense" in the fiscal year ended February 28, 2019.
Other Assets
12
The breakdown of other assets is as follows:

13
Property, Plant and Equipment
(1)Schedule of changes
Changes in acquisition costs and accumulated depreciation and impairment of property, plant and equipment are as follow:
Notes:    1.   The amount of depreciation expense for property, plant and equipment is included in "cost of sales" and "selling, general and administrative expense" in the consolidated statement of income. 21 Please refer to "29. Other Operating Income" for the gain on sales of non-current assets for the fiscal years ended February 28, 2018 and February 28, 2019, and "32. Other Operating Expense" for the loss on disposals of non-current assets for the fiscal years ended February 28, 2018 and February 28, 2019.
(2)Leased assets
Carrying amounts of leased assets under finance leases included in property, plant and equipment are as follows:

(3)Impairment loss
Property, plant and equipment are grouped based on the smallest cash-generating unit (principally stores) that generates cash inflows largely independent of those of other assets. Impairment loss is recorded in "other operating expense" in the consolidated statement of income. The breakdown of the assets for which impairment losses were recognized by segment is as follows:
1)With regard to the Department Store Business, principally because the recovery of the amount invested cannot be expected due to the decreased profitability of Daimaru Ashiya store, the carrying amount of the cash- generating unit was reduced to the recoverable amount and the reduction was recognized as an impairment loss. The recoverable amount of the cash-generating unit was measured at value in use. Since the value in use based on future cash flows was a negative figure, the carrying amount of each asset was impaired to zero. 2)With regard to the PARCO Business, primarily because gain or loss arising from operating activities of Utsunomiya PARCO was expected to continue to be a negative amount, the carrying amount of the cash- generating unit was reduced to the recoverable amount and the reduction was recognized as an impairment loss. The recoverable amount was measured at fair value less costs of disposal. The fair value less costs of disposal was based on the amount assessed by a real-estate appraiser, and the fair value has been classified as Level 3 in the hierarchy. There was no reversal of impairment losses recorded in the fiscal year ended February 28, 2018.
1)With regard to the Department Store Business, principally because the recovery of the amount invested for Nippori Center cannot be expected due to the decision to change its use to a property for real estate development, the carrying amount of the cash-generating unit was reduced to the recoverable amount and the reduction was recognized as an impairment loss. The recoverable amount of the cash-generating unit was measured at value in use. Since the value in use based on future cash flows was a negative figure, the carrying amount of each asset was impaired to zero. 2)With regard to the PARCO Business, primarily because gain or loss arising from operating activities of Tsudanuma PARCO was expected to continue to be a negative amount, the carrying amount of the cash- generating unit was reduced to the recoverable amount and the reduction was recognized as an impairment loss (¥1,220 million). In addition, with regard to Kumamoto PARCO for which the decision to cease operations was made, an impairment loss (¥692 million) was recorded as loss on business liquidation. The recoverable amount of the cash-generating unit was measured at value in use, and calculated discounting future cash flows by 4%, taking into account the future profitability and other factors. There was no reversal of impairment losses recorded in the fiscal year ended February 28, 2019.
(4)Assets pledged as collateral
Please refer to "20. Bonds and Borrowings" for assets pledged as collateral.
(5)Commitments
Please refer to "40. Commitments" for commitments related to purchase of property, plant and equipment. 14
Goodwill and Intangible Assets
(1)Schedule of changes
Changes in acquisition costs, accumulated amortization and impairment and carrying amounts of goodwill and intangible assets are as follows:
The amount of amortization expense for intangible assets is included in "cost of sales" and "selling, general and administrative expense" in the consolidated Note: statement of income.
(2)Leased assets
Carrying amounts of leased assets under finance leases included in intangible assets are as follows:

(3)Impairment test on goodwill
Goodwill arising in business combinations is allocated to cash-generating units that benefit from the business combination on the acquisition date. The breakdown of the carrying amount of goodwill by segment is as follows:
The Group tests goodwill for impairment each fiscal year, or whenever there is an indication of impairment. To test goodwill for impairment, cash-generating units to which the goodwill is allocated are integrated so that impairment is tested reflecting the smallest units related to the goodwill. Goodwill acquired in a business combination is allocated to cash-generating units that are expected to benefit from the synergies of the combination. In calculating the recoverable amount, the Group estimates the discounted present value of future cash flows generated from use of the asset and the discounted present value of future cash flows generated from ultimate 15
Investment Property
(1)Schedule of changes
disposal of the asset. These estimates are based on management's best estimates, but may differ from actual results due to effects of changes in uncertain future economic conditions. There is a risk that impairment may arise if major assumptions used for impairment test are changed. However, the value in use sufficiently exceeds the carrying amount of the cash-generating unit or the group of cash- generating units, and the Group considers value in use unlikely to fall below the carrying amount even if major assumptions used for impairment tests change within a reasonably foreseeable range.
Changes in acquisition costs, accumulated amortization and impairment and carrying amounts of investment property and fair values as of the end of each fiscal year are as follows:

Carrying amounts and fair values

Fair value of investment property is based on real-estate appraisal by an external real-estate appraiser with recent experience in appraisal for the region where the property is located and the type of the property to be valued who holds certified professional qualifications and others. The appraisal is based on market evidence reflecting the transaction price of similar assets in accordance with valuation standards of the country where the property is located.
(2)Income and expenses from investment property

The amounts of rental income from investment property and accompanying direct operating expense are included in "sales revenue" and "cost of sales," respectively, in the consolidated statement of income.
(3)Commitments
Please refer to "40. Commitments" for commitments related to purchase of investment property.
Investments Accounted for Using the Equity Method
16
Investments in associates The carrying amount of investments in associates that are not individually material is as follows:
The Group's share of comprehensive income of associates that are not individually material is as follows:

Joint operations
17
In the Group, Daimaru Matsuzakaya Department Stores Co. Ltd., a subsidiary, works on the joint operation of GINZA SIX, a commercial facility located at Ginza 6-chome 10, running the joint operation with partners, namely Mori Building Co., Ltd., L Catterton Real Estate and SUMITOMO CORPORATION. With regard to revenue and expenses related to the operation of this commercial facility, including profit and loss based on tenant agreements, the amount corresponding to the ownership ratio of Daimaru Matsuzakaya Department Stores Co. Ltd. (68%), determined according to the ownership category of the commercial facility and other factors, was recognized.
Income Tax
18
(1)Deferred tax assets and liabilities
The breakdown of and changes in deferred tax assets and liabilities by major cause are as follows: Fiscal year ended February 28, 2018
Deferred tax assets and liabilities in the consolidated statement of financial position are as follows:
In recognizing deferred tax assets, the Group takes into account the possibility that tax loss carryforwards or deductible temporary differences can be utilized against future taxable profit. In the recoverability of deferred tax assets, the Group considers the scheduled reversal of deferred tax liabilities, projected future taxable profit and tax planning. Based on the result of the above assessment of recoverability of deferred tax assets, the Group has not recognized deferred tax assets for certain tax loss carryforwards and deductible temporary differences. Tax loss carryforwards and deductible temporary differences for which deferred tax assets have not been recognized are as follows:
The deferral period of tax loss carryforwards for which deferred tax assets have not been recognized is as follows:
As of February 28, 2018 and February 28, 2019, the total amount of temporary differences for investments in subsidiaries that were not recognized as deferred tax liabilities was ¥161,035 million and ¥172,890 million, respectively.
(2)Income Tax
The breakdown of income tax is as follows:

(3)Reconciliation between effective tax rates

Income Tax Act, etc." (Act No. 15 of 2016) and the "Act on Partial Revision of the Local Tax Act, etc." (Act No. 13 the rates of income taxes for fiscal years beginning on or after April 1, 2016. In accordance with these revisions, for temporary differences expected to be reversed in fiscal year beginning on or after March 1, 2017, the effective statutory tax rate used to measure deferred tax assets and liabilities has been changed from 32.3% to 30.9%. In addition, for temporary differences expected to be reversed in fiscal years beginning on or after March 1, 2019, the effective statutory tax rate used to measure deferred tax assets and liabilities has been changed to 30.6%. 19
Cash Flow Information
(1)Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities are as follows: Fiscal year ended February 28, 2018
Derivatives are held in order to hedge interest rate fluctuation risk and foreign exchange fluctuation risk. Fiscal year ended February 28, 2019
Derivatives are held in order to hedge interest rate fluctuation risk and foreign exchange fluctuation risk.
(2)Non-cash transactions
Property, plant and equipment and investment property acquired through finance leases are as follows:
Property, plant and equipment and investment property acquired through finance leases
Bonds and Borrowings
20
(1)Breakdown of financial liabilities The breakdown of "bonds and borrowings" and "other financial liabilities" is as follows:
21 Summary of issuing conditions of bonds is as follows:
Agreements on some of borrowings of the Group require the maintenance of specific financial ratios and net assets at a certain level. The Group has complied with all the agreements on borrowings.
(2)Assets pledged as collateral
The Group has pledged corporate properties as collateral for borrowings, etc. Secured creditors have the right to receive the payment of their claims prior to other unsecured creditors with regard to the Group's properties. Assets pledged as collateral for borrowings, etc. are as follows:
The corresponding obligations are as follows:

21
Leases
(1)As lessee
1)Finance leases The total of future minimum lease payments under finance lease arrangements and their present value are as follows:
Future minimum lease payments receivable on non- cancellable sublease as of February 28, 2018 and February 28, 2019 were ¥2,782 million and ¥2,976 million, respectively. The Group leases system facilities (furniture and fixtures) and others in the information service business as a lessee. Renewal options and purchase options have been attached to certain lease agreements. In addition, there are no contingent rents payable, no escalation clauses (clause providing for an increase in the lease agreement amount) and no restrictions imposed by lease agreements (such as restrictions related to dividends, additional borrowing and additional leases).
2)Operating Leases
Future minimum lease payments under non-cancellable operating leases are as follows:
Minimum lease payments and contingent rents under operating lease agreements recognized as expenses are as follows:
The Group leases commercial buildings and others as the lessee. Renewal options and purchase options have been attached to certain lease agreements. In addition, there are no escalation clauses (clause providing for an increase in the lease agreement amount) and no restrictions imposed by lease agreements (such as restrictions related to dividends, additional borrowing and additional lease). Future minimum lease payments receivable on non- cancellable sublease agreements as of February 28, 2018 and February 28, 2019 were ¥10,414 million and ¥9,434 million, respectively. Sublease payments receivable recognized as revenue under cancellable or non-cancellable operating leases in the fiscal years ended February 28, 2018 and February 28, 2019 were ¥12,920 million and ¥12,554 million, respectively.
(2)As lessor
1)Finance leases The information has been omitted due to its immateriality.
2)Operating Leases
Future minimum lease payments receivable under non- cancellable operating leases are as follows:
The Group leases commercial buildings and others as the lessor. Contingent rents recognized as revenue are as follows:

Trade and Other Payables
The breakdown of trade and other payables is as follows. These are all classified as financial liabilities measured at amortized cost.

Employee Benefits
23
The Group has established defined benefit plans (such as a corporate pension fund plan and lump-sum retirement benefit plan) as employee retirement benefit plans, and certain consolidated subsidiaries have adopted defined contribution plans. In addition, the Group may pay extra retirement payments when employees retire before their normal retirement date. Certain consolidated subsidiaries have instituted a retirement benefit trust. In regard to the corporate pension fund plan, the Group has obligations including paying contributions to the corporate pension fund under the Defined-Benefit Corporate Pension Act, etc. Directors of the fund have responsibilities including a duty of loyalty to comply with laws and regulations, dispositions made by the Minister of Health, Labour and Welfare and Director-Generals of Regional Bureaus of Health and Welfare in accordance with laws and regulations, and the rules of the corporate pension fund and resolutions of the board of representatives, and faithfully execute operations related to managing and operating funds in the interests of the fund. In addition, it is stipulated that directors are forbidden from entering into any asset management contract aimed at serving the interests of a third party, and rules of conduct that include forbidding acts that create a conflict of interest are clarified. The plan is mainly operated by a corporate pension fund that is independent from the Group. The board of representatives comprises the same number of representatives elected from among the employers (elected representatives) and representatives elected from among employees (mutually elected representatives), and the chairperson (president) of the board of representatives is elected from among the employers. Decisions of the board of representatives are made by a majority of members in attendance, but in the case of a tie, the President, who is the Chairperson, has the authority to make a decision. However, it is stipulated that decisions related to particularly important matters shall be determined by a majority in excess of the above. The board of representatives holds the authority to make decisions about all important matters, such as investment policies. Actual asset management is conducted by a managing trustee under an investment service agreement, and directions from the board of representatives regarding investment in individual securities, etc. are forbidden by laws and regulations. The Company is required to pay contributions to the corporate pension fund and contributions are regularly reviewed within the range permitted by laws and regulations. While the Company is obligated to make contributions stipulated by the fund into the future, in addition to these contributions, it also funds a retirement benefit trust on a voluntary basis. With regard to the lump-sum retirement benefit plan, the Company is obligated to pay benefits directly to the beneficiaries. There are no statutory requirements regarding funding.
(1)Defined benefit plans
The relationship between the present value of the defined benefit obligations and the fair value of the plan assets and the amounts recognized in the consolidated statement of financial position is as follows:
Changes in the present value of the defined benefit obligations are as follows:
Changes in the fair value of the plan assets are as follows:
The Group's management of plan assets is aimed at ensuring the necessary income over the long-term to reliably make pension and lump-sum payments into the future. Its investment policy to achieve this is fundamentally to make diversified investments after analyzing characteristics of risks and returns for each asset and taking into account correlations between respective assets. Specifically, the Group develops the policy asset mix that is the optimal combination now and in the future after taking into account the expected rate of return and risks on eligible investments, and the managing trustee manages assets accordingly. In regard to plan assets, the status of asset management is managed primarily by regularly reviewing the financial position of the plans, formulating long-term management policies, and monitoring the status of asset allocation. The Group's pension funding is determined after taking into consideration various factors such as the allowable limit of deductible expenses under tax laws, the funding status of plan assets and actuarial calculations. Contributions to plan assets are intended to cover benefits for services already rendered, in addition to benefits for services to be rendered in future. In accordance with the provisions of the Defined-Benefit Corporate Pension Act, the rules of the corporate pension fund stipulate that the amount of contributions shall be recalculated every three to five years with a record date of the fiscal year end, in order to preserve a balanced budget into the future. During the recalculation, the basic rates related to contributions (expected interest rates, expected mortality rates, expected withdrawal rates, expected salary increase indexes, expected number of new participants, etc.) are reviewed, and the appropriateness of the contributions is reverified. The Group plans to pay contributions of ¥988 million in
The sensitivity analysis is conducted based on changes in assumptions that are reasonably possible, as of the end of the fiscal year. The sensitivity analysis is based on the premise that all actuarial assumptions remain constant other than the actuarial assumption that is the focus of the analysis, but in reality there is a possibility that changes in other the fiscal year ending February 29, 2020. The weighted average duration of the defined benefit obligations as of February 28, 2018 was 7.24 years. The weighted average duration of the defined benefit obligations as of February 28, 2019 was 7.54 years. The main actuarial assumptions used to calculate the present value of the defined benefit obligations are as follows: actuarial assumptions may affect the sensitivity analysis. If there are no other changes to assumptions, the sensitivity of defined benefit obligations at the end of each fiscal year to changes in the discount rate is as follows. Furthermore, the Group does not expect any changes in the anticipated rate of salary increase.
Amounts recognized as retirement benefit expense are as follows:

(2)Defined contribution plans
The amount recorded as expenses in relation to defined contribution plans is ¥6,041 million for the fiscal year ended February 28, 2018 and ¥5,967 million for the fiscal year ended February 28, 2019, and included in "cost of sales" and "selling, general and administrative expense" in the consolidated statement of income. The above amounts include the amount of the employer's contribution to welfare pension insurance premiums.
(3)Extra retirement payments
Extra retirement payments may be provided when an employee retires prior to the normal retirement date. The amount recorded as expenses in relation to extra retirement payments was ¥39 million in the fiscal year ended February 28, 2019 and included in "other operating expense" in the consolidated statement of income.
(4)Employee benefit expenses
The amount of employee benefit expenses was ¥77,879 million in the fiscal year ended February 28, 2018 and ¥76,616 million in the fiscal year ended February 28, 2019, and included in "cost of sales" and "selling, general and administrative expense" in the consolidated statement of income.
24
Provisions
The breakdown and changes of provisions are as follows:
The breakdown of provisions in the consolidated statement of financial position is as follows:

(1)Asset retirement obligations
Asset retirement obligations are recorded at the estimated amount of restoration costs for rented stores, offices, etc. for which the Group has obligations to restore to original state at the time when the lease agreement is terminated. These expenses are expected to be mainly paid after two to 50 years or more have passed, and will be affected by future business plans, etc.
(2)Provision for loss on business liquidation
An amount of loss is recorded for the cost of store dismantlement, etc. that is expected to be borne in the future as a result of business liquidation, store closure and store rebuilding. These expenses are expected to be mainly paid within three years after store closure or rebuilding, but will be affected by changes in the surrounding environment and others. 25
Other Liabilities
The breakdown of other liabilities is as follows:
government grants. The breakdown of deferred income in the fiscal year ended February 28, 2019 is ¥237 million in government grants. 21 These represent gift certificates issued by Daimaru Matsuzakaya Tomonokai Co., Ltd., a consolidated subsidiary of the Company. 3. Some vouchers, advances received, deferred income, etc. in the fiscal year ended February 28, 2019 were transferred to contract liability. 26
Equity and Other Equity Items
(1)Capital and share premium

(2)Treasury shares

in the above number of treasury shares.
(3)Nature and purposes of share premium and retained
eamings
1)Share premium It is stipulated in the Companies Act of Japan ("Companies Act"), that at least 50% of the payment of certain issues of common shares shall be credited to capital. The remainder of the payment shall be credited to legal capital surplus included in share premium. In addition, the Companies Act permits, upon approval of the shareholders meeting, the transfer of amounts from legal capital surplus to capital.
2)Retained earnings
Under the Companies Act, 10% of the amount paid as dividends from surplus shall be reserved as legal capital surplus (an item of share premium) or legal retained earnings (an item of retained earnings), until the total amount of legal capital surplus and legal retained earnings reaches 25% of capital. The legal retained earnings may be used to eliminate or reduce a deficit, or may be reversed by resolution of the shareholders meeting. (4)Nature and purposes of other components of equity Exchange differences on translation of foreign operations Exchange differences on translation of foreign operations represent the translation differences that occurred when consolidating financial statements denominated in a foreign currency for companies including foreign subsidiaries.
Cash flow hedges
The Group uses derivatives to hedge the risk of fluctuations in future cash flows. Cash flow hedges represent the effective portion of changes in fair value of derivative transactions designated as cash flow hedges. Financial assets measured through other comprehensive income Financial assets measured at fair value through other comprehensive income represent the changes in fair value of financial assets measured at fair value through other comprehensive income. Remeasurements of defined benefit plans Remeasurements of defined benefit plans are the effect of difference between actuarial assumptions as at the beginning of the period and actual results in defined benefit plans and the effect of changes in actuarial assumptions. They are recognized in other comprehensive income when incurred and immediately transferred from other components of equity to retained earnings. 27
Dividends
(1)Dividends paid

shares held by the officer remuneration BIP trust.
held by the officer remuneration BIP trust. Total amount of dividends resolved at the Board of Directors meeting held on October 9, 2018 includes ¥39 million of dividends paid on the Company's shares held by an officer remuneration BIP trust.
(2)Dividends whose effective date belongs to the following fiscal year
Fiscal year ended February 28, 2018
Note: held by the officer remuneration BIP trust. Total amount of dividends resolved at the Board of Directors meeting held on April 10, 2018 includes ¥46 million of dividends paid on the Company's shares
Total amount of dividends resolved at the Board of Directors meeting held on April 9, 2019 includes ¥42 million of dividends paid on the Company's shares Note: held by an officer remuneration BIP trust. 28
Sales Revenue
(1)Disaggregation of revenue
In accordance with the IFRS 8 Operating Segments, the Group reports information about its four segments, namely "Department Store Business," "PARCO Business," "Real Estate Business" and "Credit Finance Business." These reportable segments are periodically examined by the Board of Directors for the purpose of deciding the allocation of management resources and assessing business results. Furthermore, the "Other" category is an operating segment not included as a reportable segment. It includes design and construction contracting, manufacture and sale of furniture, wholesaling, parking, leasing, etc. segments can be used to meet the objective for the disaggregation disclosure requirement in paragraph 114 of IFRS 15. The following table shows the disaggregation of revenue in accordance with the above categories and includes the reconciliation representing how disaggregated revenue relates to each segment. Revenue arising from these businesses is recorded in accordance with contracts with customers, and the amount of sales revenue related to variable consideration, etc. is immaterial. In addition, the amount of promised consideration does not include any material financial

1)Department Store Business
The Department Store Business carries out the sale of clothing, general goods, household goods, food products and others. With regard to these sales of goods, since performance obligations are deemed to be satisfied at the time when goods are delivered to customers, the Group recognizes revenue at the time of delivery of such goods. Payments for goods are received at the time of delivery of the goods, which is the time when the performance obligation is satisfied.
2)PARCO Business
The PARCO Business operates the shopping center business, in which it undertakes development, management, supervision and operation of shopping centers; the specialty store business, in which it sells personal belongings, general goods and others, the space engineering and management business, in which it undertakes design, operation, etc. of interior decorating work, and other businesses. With regard to services in the shopping center business, because these services are provided on a continuous basis and thus performance obligations are deemed to be satisfied over a certain period of time, revenue is recognized as the services are rendered. With regard to the sale of personal belongings, general goods and others, since performance obligations are usually deemed to be satisfied at the time when goods are delivered to customers, revenue is recognized at the time of delivery of such goods. Payments for goods are received at the time of delivery of the goods, which is the time when the performance obligation is satisfied. With regard to the design and operation of interior decorating work in the space engineering and management business, if the outcome of a work contract can be estimated reliably, revenue is recognized according to the stage of completion of the performance obligation. If the outcome of a work contract cannot be estimated reliably, revenue is recognized only to the extent that it is probable that the contract costs incurred will be recoverable.
3)Real Estate Business
The Real Estate Business carries out development of the Group's own properties located mainly in areas surrounding each store of Daimaru Matsuzakaya Department Stores, expansion of rental space by leasing and acquiring external properties, management and operation of such properties, and others. Revenue from lease of real estate and others is recognized in the period in which it is earned, in accordance with IAS 17.
4)Credit Finance Business
The Credit Finance Business undertakes issuance and administration of credit cards. In the Credit Finance Business, annual membership fees from cardholders, fees from department stores and external affiliated stores, and interest from installment sales are recognized as revenue.
5)Other
Within Other, regarding the design and operation of interior decorating work in the design and construction contracting business, if the outcome of a work contract can be estimated reliably, revenue is recognized according to the stage of completion of the performance obligation. If the outcome of a work contract cannot be estimated reliably, revenue is recognized only to the extent that it is probable that the contract costs incurred will be recoverable.
(2)Balance of contracts
Balance of contracts of the Group is as follows:
Receivables from contracts with customers primarily consist of receivables in association with the use of credit cards issued by the Group, and the anount includes the anount collected on behalf of third parties as agent transactions. The collection period of these receivables is mainly within one to two months. 2. Contract assets Contract assets are related to rights to considerations arising when the Group is to receive payments from customers in line with a series of performances, and are recognized mainly in association with contracted work agreements. For the completed part of work, the Group recognizes contract assets in advance, and they are transferred to trade receivables at the time when the customer conducts acceptance inspection and the invoice is sent. Contract assets are included in trade and other receivables in the consolidated statement of financial position. 3. Contract liabilities Contract liabilities are related to consideration received prior to performance under contracts and transferred to revenue at the time when the Group performs obligations under contracts. Contract liabilities are included in other current liabilities in the consolidated statement of financial position. Of contract liabilities at the beginning of the period, the amount recognized in revenue in the fiscal year ended February 28, 2019 was ¥22,588 million. The increase in contract assets in the fiscal year ended February 28, 2019 is mainly due to an increase resulting from growth in construction orders received of ¥1,580 million. Regarding performance obligations satisfied or partially satisfied in prior periods, no amount was recognized in sales revenue in the fiscal year ended February 28, 2019.
(3)Transaction price allocated to the remaining performance
obligations
With regard to ¥63,519 million in total of transaction price allocated to the remaining performance obligations as of February 28, 2019, the Group will recognize revenue in accordance with progress toward completion of construction work and the actual use of gift certificates and points. It is expected that ¥54,608 million will be recognized as revenue in the fiscal year ending February 29, 2020, then ¥5,422 million in the fiscal year ending February 28, 2021, and ¥3,489 million thereafter.
Other Operating Income
29
The breakdown of other operating income is as follows:

Cost of Sales
30
The breakdown of cost of sales is as follows:

31
Selling, General and Administrative Expense
The breakdown of selling, general and administrative expense is as follows:

Other Operating Expense
32
The breakdown of other operating expense is as follows:

33 Finance Income and Finance Costs

The breakdown of finance income is as follows: The breakdown of finance costs is as follows:
34
Other Comprehensive Income
The amount arising during the period and reclassification adjustments to profit or loss for each item of other comprehensive
35
Earnings per Share

trust from the average number of ordinary shares during the period because such shares are treated as the Company's treasury shares.
36
Share-Based Payment
(1)Share-based payment plan
1)Details of share-based payment plan The Group has adopted an officer remuneration BIP (Board Incentive Plan) trust (the “BIP Trust”) as a performance-linked share-based payment for officers of the Company and Daimaru Matsuzakaya Department Stores Co. Ltd. to ensure steady execution and progress of the Medium-term Business Plan. The BIP Trust is a system of granting points (one point = one share) in accordance with the officers' rank and level of achievement of the Medium-term Business Plan, etc. and distributing the Company's shares to officers (in certain cases, the Company's shares are converted into cash within the trust and cash in the amount equivalent to their conversion value is paid) according to level of annual accomplishments in performance each year for short-term PS, according to level of achievement of the Medium-term Business Plan (five years) after the completion of the Medium-term Business Plan for medium- to long-term PS, and in the number of shares according to the rank at the time of retirement from the position for RS. In addition, from the current fiscal year, PARCO Co., Ltd. has introduced a Share Distribution Trust as share- based payment for Executive Officers to strengthen the linkage between share value and remuneration, and thereby share interests with shareholders. The consideration for the services received is calculated using the fair value of the shares on the grant date. This value is expensed over the vesting period from the grant date, and a corresponding amount is recognized as an increase in equity.
2)Number of points granted during the period and weighted
average fair value of the points In the assessment of fair value, a calculation is made based on the market price of shares adjusted after taking into account expected dividends. The number of points granted during the period and weighted average fair value of the points are as follows:
2. RS (Restricted Stock) means shares granted with restriction on transfer of shares for a certain period established. 3. The Share Distribution Trust is a system of distributing shares at the time of retirement and paying the amount of cash equivalent to their conversion value.
(2)Share-based payment expense
The amounts recognized as share-based payment expense, which were included in the consolidated statement of income, were ¥365 million in the fiscal year ended February 28, 2018 and ¥505 million in the fiscal year ended February 28, 2019. 37
Financial Instruments
(1)Capital management
In order to realize the Group's vision to "Create and Bring 'New Happiness' to Your Life," the Group works to increase productivity and managerial efficiency as a group and conducts capital management with the aim of achieving sustained improvement in corporate value. The Group aims to achieve an optimal balance of debt to equity which takes into consideration the cost of capital. Major indicators monitored in the capital management are ROE and D/E ratio. The Group's, management also monitors and checks these indicators to maintain sound financial condition and increase managerial efficiency including effective utilization of assets. Furthermore, the Group is not subject to any material capital regulations.
(2)Financial risk management policy
In the course of its business activities, the Group is exposed to financial risks (credit risk, liquidity risk, foreign currency risk, and interest rate risk), and engages in risk management to reduce these financial risks. The Group uses derivative transactions to avoid foreign currency fluctuation risk or interest rate fluctuation risk and, in accordance with its policy, does not carry out any speculative transactions.
1)Credit risk management
Credit risk is the risk that a business partner will default on contractual obligations and cause the Group to incur a financial loss. To address this risk, each Group company carries out due date management and balance management for each business partner and seeks early identification and mitigation of collectability concerns. The Group's receivables are from a number of business partners in a wide range of industries and regions. The Group does not have credit risks overly concentrated in a single counterparty or a group to which the counterparty belongs. The maximum exposure to credit risk on financial assets is the carrying amount after impairment presented in consolidated financial statements. The Group does not hold any properties as collateral or other credit enhancements in regard to exposure to these credit risks. The Group considers whether or not there has been a significant increase in credit risk from the date of initial recognition, and establishes an allowance for credit losses. Specifically, when there is no significant increase in credit risk since initial recognition, expected credit losses for 12 months are measured as allowance for credit losses. On the other hand, when there is a significant increase in credit risk since initial recognition, lifetime expected credit losses are measured as allowance for credit losses. Whether credit risk has significantly increased or not is determined based on changes in default risk. Regardless of the above, for trade receivables, lease receivables, etc. without a significant financing component, allowance for credit losses is measured at an amount equal to lifetime expected credit losses. In the measurement of these expected credit losses, reasonable and supportable information that is available at the fiscal year end is used for past events, current situations and projection of future economic conditions such as credit loss experience in past years, status of delinquent receivables and financial conditions of creditors. Expected credit losses on financial assets for which credit risk has not increased significantly and trade receivables, etc. without a significant financing component are set altogether as a group and collectively assessed based on historical credit losses because they have largely homogeneous credit risk characteristics. Expected credit losses on financial assets for which credit risk has increased significantly and credit-impaired financial assets are individually assessed, taking into account historical credit loss experience, future estimated collectible amount and others. If a debtor does not make a payment within 90 days after the due date, the situation is considered as default. When financial assets are assessed as fully or partially uncollectible and the Group determines, as a result of credit research, that it is appropriate to write off the assets, the Group directly writes off the carrying amount of the credit-impaired financial assets.
(i)Changes in allowance for credit losses
The Group considers whether or not there has been a significant increase in credit risk from the date of initial recognition, and establishes an allowance for credit losses.

2)Liquidity risk management
Liquidity risk is the risk of failure to make payments on the due date when the Group is required to fulfill its payment obligations for financial liabilities due. The Group manages liquidity risk with methods such as preparing monthly cash flow management plans at all companies, and securing sufficient liquidity on hand through commitment line contracts and overdraft contracts with its main financing banks. The balance of financial liabilities (other than lease obligations, etc.) by payment due date is as follows:
2. Receivables and liabilities resulting from derivative transactions are presented on a net basis.
Notes: 1. Current borrowings include the current portion of non-current borrowings. 2. Receivables and liabilities resulting from derivative transactions are presented on a net basis. If funds are temporarily insufficient for the payment of trade payables, etc., the Group procures funds with the following financing methods. Fund procurement methods and the status of procurement in each fiscal year were as follows:

3)Foreign currency risk management
The Group conducts transactions denominated in foreign currencies and is exposed to the risk of fluctuations in exchange rates of foreign currencies against the Japanese yen, but this has immaterial effect on profit before tax.
4)Interest rate risk management
The Group is exposed to various interest rate fluctuation risks in the course of its business activities. Particularly, fluctuations in interest rates greatly affect borrowing costs. To mitigate such interest rate fluctuation risks, the Group hedges the risks by conducting interest rate swap transactions and other means. Payment of interest has an immaterial effect on the Group's profit or loss.
(3)Fair value of financial instruments
1)Calculation method of fair value (Cash and cash equivalents, trade and other receivables, other financial assets (current), trade and other payables, and other financial liabilities (current)) The carrying amount is used as the fair value of these instruments, given that the fair value is almost the same as the carrying amount, as they are mostly settled in a short period of time. Derivatives are measured as financial assets or liabilities measured at fair value through profit or loss based on prices presented by the counterparty financial institutions. Carrying amount and fair value of major
financial instruments by type are as follows.
(Other financial assets (non-current), and other financial liabilities (non-current)) The fair value of listed shares is measured based on market prices at the last date of a fiscal year. The fair value of unlisted shares is measured by discounted future cash flows, valuation model based on profit and net assets, comparable company analysis method or the like. Other financial assets or other financial liabilities measured at amortized cost mainly consist of lease and guarantee deposits paid or lease and guarantee deposits received, and their fair value is measured at present value calculated by discounting future cash flows at rates such as the current market interest rate.
(Bonds and borrowings)
Bonds and borrowings are measured by present value obtained by discounting future cash flows at interest rates that would be charged for a new similar borrowing.
2)Financial instruments measured at amortized cost
The carrying amounts and fair values of financial instruments measured at amortized cost are as follows. Financial instruments measured at fair value and financial instruments whose carrying amount closely approximates fair value are not included in the following table.
3)Fair value measurement In regard to financial instruments measured at fair value, the fair value amounts measured are categorized into three levels, from Level 1 to Level 3, in accordance with the observability and materiality of inputs used in measurement. Level 1:  Market prices for identical assets or liabilities in active markets Level 2:  Fair value, other than Level 1, that is determined by directly or indirectly using an observable price Level 3: Fair value that is determined using a valuation technique including unobservable inputs The fair value of financial instruments measured at fair value is as follows. Any transfer between levels in the fair value hierarchy is recognized on each reporting date. In the fiscal years ended February 28, 2018 and February 28, 2019, there was no transfer between Level 1, Level 2 and Level 3.
As of February 28, 2018

4)Changes, from the beginning to the end of the period, in financial instruments whose fair value measurement is categorized within Level 3 Changes, from the beginning to the end of the period, in financial instruments whose fair value measurement is categorized within Level 3 are as follows:
reporting date. These gains or losses are included in "financial assets measured at fair value through other comprehensive income" in the consolidated statement of comprehensive income. Financial instruments classified as Level 3 principally consist of unlisted shares. Fair value of unlisted shares is measured by the Group's department in charge using the latest figures available for each quarter in accordance with the Group's accounting policies and others, and reported together with the basis for changes in fair value to superiors and to management where necessary. Illiquidity discount that is a significant unobservable input used for the measurement of fair value classified as Level 3 in the fair value hierarchy is 30% in the calculation. A significant increase (decrease) in this input will cause a significant decrease (increase) in the fair value. (4)Fair value hierarchy for assets and liabilities that are not measured at fair value but of which fair value has been disclosed Fair values of financial instruments measured at amortized cost are as follows. Financial instruments measured at fair value and financial instruments whose carrying amount closely approximates fair value are not included in the following tables.

(5)Financial assets measured at fair value through other
comprehensive income
The Group designates investments in equity instruments held in order to maintain and strengthen business relationships as financial assets measured at fair value through other comprehensive income in the light of the holding purpose.
1)Fair value of securities
In regard to investments in equity instruments designated as financial assets measured at fair value through other comprehensive income, the fair value of the main securities is as follows:
2)Dividend income
3)Financial assets measured at fair value through other comprehensive income derecognized during the period The Group sells financial assets measured at fair value through other comprehensive income for the purpose of periodic portfolio revisions, management of risk assets and others. The fair value on the date of sale thereof and cumulative gain or loss on the sale (before tax) are as follows:

4)Transfer to retained earnings
The Group transfers cumulative gain or loss caused by fluctuations in the fair value of financial assets measured at fair value through other comprehensive income to retained earnings when the asset is derecognized. In the fiscal years ended February 28, 2018 and February 28, 2019, cumulative gain or loss (after tax) in other comprehensive income transferred to retained earnings were ¥472 million and ¥466 million, respectively. Cash flow hedges are hedges to avoid the risk of fluctuations in future cash flows. The Company utilizes forward exchange contracts to hedge fluctuations in cash flows for forecast transactions, and interest rate swaps and currency swaps to hedge fluctuations in cash flows related to floating-rate borrowings. Changes in fair value of derivative transactions designated as cash flow hedges are recognized as other comprehensive income, included in other components of equity, and transferred to profit (loss) when the hedged item is recognized as profit (loss).
(6)Derivatives and hedges
1)Cash flow hedges The details of hedging instruments designated as cash flow hedges are as follows: As of February 28, 2018
As of February 28, 2019

(7)Transfer of financial assets
The Group securitizes certain trade receivables through the transfer of shares. However, some of such securitized receivables impose an obligation to pay on the Group retrospectively if the debtor does not make a payment. Since these securitized receivables do not meet requirements for derecognition of financial assets, they are not derecognized. As of February 28, 2018 and February 28, 2019, such transferred assets were recorded in "trade and other receivables" and the amount of money received arising at the time when the assets were transferred as related liabilities was recorded in "bonds and borrowings," at ¥18,150 million in the fiscal year ended February 28, 2018 and ¥10,150 million in the fiscal year ended February 28, 2019.
Subsidiaries
38
(1)Subsidiaries

(2)Subsidiaries with material non-controlling interests The Company has subsidiaries with material non-controlling interests. Information on these subsidiaries is as follows: PARCO Co., Ltd. and companies under its control
Condensed financial statements before elimination of intragroup transactions including goodwill and consolidation adjustments at the time of acquisition are as follows:

(3)Transfer of subsidiaries
The Group transferred all shares of Forest Co., Ltd. on August 31, 2017 to EDION Corporation. Major components of assets and liabilities at the time of loss of control over companies that are no longer subsidiaries due to sale of the shares, and relationship between consideration received and balance of revenue with expense due to the sale are as follows:
39
Related Parties
(1)Transactions with related parties Notes related to transactions with related parties (excluding those eliminated in the consolidated financial statements) have been omitted because there were no significant transactions, etc.
(2)Remuneration for key management personnel
Description of the remuneration for Directors and other key management personnel of the Group is as follows:

Commitments
40
Commitments related to expenditures after the reporting date are as follows:

Contingent Liabilities
41
Amount of guarantee obligations The Group has provided guarantee for transactions, etc. between its employees and financial institutions as follows:

Subsequent Events
42
No items to report.
43
Approval of Consolidated Financial Statements
These consolidated financial statements were approved by the President and Representative Executive Officer Ryoichi Yamamoto on May 27, 2019.
(2) Other

The Board of Directors J. FRONT RETAILING Co., Ltd. We have audited the accompanying consolidated financial statements of J. FRONT RETAILING Co., Ltd. and its consolidated subsidiaries, which comprise the consolidated statement of financial position as at February 28, 2019, and the consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for designing and operating such internal control as management determines is necessary to enable the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. The purpose of an audit of the consolidated financial statements is not to express an opinion on the effectiveness of the entity's internal control, but in making these risk assessments the auditor considers internal controls relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of J. FRONT RETAILING Co., Ltd. and its consolidated subsidiaries as at February 28, 2019, and their consolidated financial performance and cash flows for the year then ended in conformity with International Financial Reporting Standards. Tokyo, Japa J. FRONT RETAILING