オロ（3983） – Summary of Consolidated Financial Results for the Fiscal Year Ended December 31, 2021 [IFRS]

Translation Notice: This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail. Summary of Consolidated Financial Results for the Fiscal Year Ended December 31, 2021 (Based on IFRS) ORO Co., Ltd TSE Company name: Stock exchange listing: Stock code: Representative: Inquiries: 1. Consolidated financial results for the Fiscal Year Ended December 31, 2021 (from January 1, 2021 to December 31, 2021) https://www.oro.com URL 3983 Atsushi Kawata, Representative Director and President Yasuhisa Hino, Senior Managing Director and General Manager for Corporate Department TEL: +81-3-5724-7001 (Amounts less than one million yen are rounded down) March 28, 2022 (1) Consolidated operating results Percentages indicate year-on-year changes Fiscal Year Ended December 31, 2021 Fiscal Year Ended December 31, 2020 Fiscal Year Ended December 31, 2021 Fiscal Year Ended December 31, 2020 Revenue Operating profit Profit before tax Profit Millions of yen 5,530 4,877 % Millions of yen 2,027 1,580 13.4 – % Millions of yen 2,032 1,549 28.3 – % Millions of yen 1,423 1,073 31.2 – % 32.6 – Basic earnings per share Diluted earnings per share Profit attributable to owners of parent Millions of yen 1,424 1,074 Total comprehensive income % Millions of yen 1,462 1,077 % 35.8 – 32.6 – Ratio of net income to equity attributable to owners of the parent Ratio of income before income taxes to total assets Ratio of operating income to revenue Fiscal Year Ended December 31, 2021 Fiscal Year Ended December 31, 2020 Reference: Share of profit or loss of entities accounted for using equity method: Fiscal Year Ended December 31, 2021: Fiscal Year Ended December 31, 2020: (2) Consolidated financial position % 23.3 18.3 % 21.3 16.8 – million yen – million yen Total assets Total equity Equity attributable to owners of parent Ratio of equity attributable to owners of parent to total assets Equity attributable to owners of the parent per share Millions of yen Millions of yen Millions of yen 9,347 9,720 5,908 6,333 5,908 6,333 Yen 87.96 64.69 % 36.7 32.4 % 63.2 65.2 Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash and cash equivalents at end of period Millions of yen Millions of yen Millions of yen Millions of yen 2,087 1,329 (34) (232) (2,088) (328) As of December 31, 2021 As of December 31, 2020 (3) Consolidated cash flows Fiscal Year Ended December 31, 2021 Fiscal Year Ended December 31, 2020 Yen – – Yen 366.76 381.41 5,914 5,904 ―1― 2. Cash dividends Fiscal Year Ended December 31, 2020 Fiscal Year Ended December 31, 2021 Fiscal Year Ending December 31, 2022 (Forecasts) Annual dividends per share 1st quarter-end 2nd quarter-end 3rd quarter-end Fiscal year-end Total Yen Yen Yen Yen Total dividends (annual) Payout ratio (consolidated) Dividends / net assets (consolidated) Yen 0.00 0.00 0.00 – – – 10.00 10.00 15.00 15.00 Millions of yen 166 241 % 15.5 17.1 15.00 15.00 16.8 – – – % 2.8 4.0 3. Forecast of consolidated financial results for the year ending December 31, 2022 (from January 1, 2022 to December 31, 2022) Revenue Operating profit Profit before tax Profit Millions of yen % 6,180 11.8 Millions of yen 2,050 % 1.1 Millions of yen 2,050 % 0.9 Millions of yen 1,435 % 0.8 Full year Percentages indicate year-on-year changes Profit attributable to owners of parent Earnings per share Millions of yen 1,435 0.8 % 89.07 Yen In Consolidated Financial Results for the fiscal year ended December 31, 2021 [Japan GAAP], the Group announced its forecasts of consolidated business performance for the fiscal year ending December 31, 2022 based on Japanese GAAP. However, due to the voluntary adoption of the International Financial Reporting Standards (IFRS) from the consolidated financial statements in the securities report for the fiscal year ended December 31, 2021, the Group announces new forecasts of consolidated business performance for the fiscal year ending December 31, 2022 [IFRS]. In addition, the Company announces that it withdrawn the consolidated earnings forecast for the fiscal year ending December 31, 2022 announced in the “Consolidated Financial Results for the Year Ended December 31, 2021 [Japan GAAP]. 4. Notes (1) Changes in significant subsidiaries during the Period (changes in specified subsidiaries resulting in the change in scope of consolidation): (2) Changes in accounting policies and changes in accounting estimates Changes in accounting principles required by IFRS: Changes in accounting policies due to other reasons: Changes in accounting estimates: (3) Number of issued shares (common shares) None None None None Total number of issued shares at the end of the period (including treasury shares) As of December 31, 2021 16,606,453 shares As of December 31, 2020 16,606,453 shares Number of treasury shares at the end of the period As of December 31, 2021 495,585 shares As of December 31, 2020 331 shares Average number of shares during the period (cumulative from the beginning of the fiscal year) Fiscal Year Ended December 31, 2021 16,190,253 shares Fiscal Year Ended December 31, 2020 16,604,112 shares * These Consolidated basic Results are not included in the scope of audits by certified public accountants or audit corporations. * Explanation concerning appropriate use of the earnings forecast and other matters to note (Caution regarding forward-looking statements) Earnings forecasts and other forward-looking statements contained in this document are based on information available at the time of this document’s preparation and on certain assumptions that are deemed to be reasonable. These forward-looking statements do not guarantee future performance, and actual results, performance, achievements or financial position may differ materially from those expressed or implied herein due to a range of factors. (Adoption of International Financial Reporting Standards [IFRS]) The Group has voluntarily adopted the International Financial Reporting Standards (IFRS) starting with its consolidated financial statements in Annual Securities Report (Yukashoken Hokokusho) for the fiscal year ended December 31, 2021. This Summary of Consolidated Financial Results and its Accompanying Materials disclose key financial information under IFRS from the items to be presented in the Group’s Annual Securities Report. Note that the Group disclosed the summary of consolidated financial results for the fiscal year ended December 31, 2021 based on Japanese GAAP on February 14, 2022. ―2― ○Accompanying Materials – Contents 1. Basic policy for selection of accounting standards ······································································· 4 2. Consolidated financial statements and key notes ········································································· 4 (1) Consolidated Statement of Financial Position ··········································································· 4 (2) Consolidated statements of income and consolidated statements of comprehensive income ···················· 6 (3) Consolidated Statement of Changes in Equity ·········································································· 8 (4) Consolidated statements of cash flows ··················································································· 9 (5) Notes on consolidated financial statements ············································································ 10 (Note on the going-concern assumption) ············································································ 10 (Segment information) ··································································································· 10 (Information per share) ·································································································· 11 (Significant subsequent events) ························································································ 11 (First-Time Adoption) ··································································································· 12 ―3― 1. Basic policy for selection of accounting standards For the purpose of enhancing the international comparability of its financial information in capital markets, the Company has adopted the International Financial Reporting Standards (IFRS) starting with its consolidated financial statements in Annual Securities Report (Yukashoken Hokokusho) for the fiscal year ended December 31, 2021. (Thousands of yen) IFRS Transition Date (January 1, 2020) As of December 31, 2020 As of December 31, 2021 2. Consolidated financial statements and key notes (1) Consolidated Statement of Financial Position Assets Current assets Cash and cash equivalents Trade and other receivables Contract assets Other financial assets Other current assets Total current assets Non-current assets Property, plant and equipment Intangible assets Other financial assets Deferred tax assets Other current assets Total non-current assets Total assets 5,904,772 1,404,805 202,762 389,713 64,655 7,966,709 1,121,083 31,233 113,144 482,050 6,222 1,753,734 9,720,443 5,914,992 1,111,675 204,700 435,525 69,311 7,736,205 913,619 45,722 111,253 517,688 23,350 1,611,635 9,347,841 5,135,866 976,178 242,305 404,557 64,840 6,823,748 1,257,326 27,799 109,190 489,941 3,192 1,887,449 8,711,198 ―4― (Thousands of yen) IFRS Transition Date (January 1, 2020) As of December 31, 2020 As of December 31, 2021 Liabilities and equity Liabilities Current liabilities Trade and other payables Contract liabilities Lease liabilities Income tax payables Provisions Other current liabilities Total current liabilities Non-current liabilities Lease liabilities Provisions Total non-current liabilities Total liabilities Equity Capital stock Capital surplus Treasury shares Retained earnings Other components of equity Equity attributable to owners of the parent Non-controlling interests Total equity Total liabilities and equity 408,789 1,383,613 176,073 255,066 11,945 455,560 2,691,049 567,796 128,006 695,802 3,386,852 1,191,403 1,093,077 (942) 4,042,203 8,029 6,333,772 (180) 6,333,591 9,720,443 375,096 1,474,343 184,826 416,396 4,934 444,772 2,900,370 411,925 127,133 539,058 3,439,428 1,193,528 1,095,407 (1,727,465) 5,300,180 47,195 5,908,847 (434) 5,908,412 9,347,841 369,246 1,216,230 182,791 249,460 41,845 368,735 2,428,310 759,725 130,153 889,878 3,318,188 1,185,030 1,086,703 (942) 3,117,416 4,514 5,392,722 286 5,393,009 8,711,198 ―5― (2) Consolidated statements of income and consolidated statements of comprehensive income Consolidated statements of income (Thousands of yen) Fiscal Year Ended December 31, 2020 Fiscal Year Ended December 31, 2021 Selling, general and administrative expenses Research and development Revenue Cost of sales Gross profit Other income Other expenses Operating profit Finance income Finance costs Profit before tax Income tax expenses Profit Profit attributable to: Owners of parent Non-controlling interests Profit Earnings per share Basic earnings per share (Yen) Diluted earnings per share (Yen) 4,877,561 1,971,689 2,905,871 1,311,702 48,807 42,781 7,581 1,580,561 6,251 37,469 1,549,343 475,609 1,073,733 1,074,183 (449) 1,073,733 64.69 – 5,530,898 2,047,480 3,483,417 1,403,867 74,113 22,578 52 2,027,962 10,102 5,659 2,032,404 608,621 1,423,783 1,424,038 (255) 1,423,783 87.96 – ―6― Consolidated statements of comprehensive income (Thousands of yen) Fiscal Year Ended December 31, 2020 Fiscal Year Ended December 31, 2021 Profit 1,073,733 1,423,783 Other comprehensive income Items that will not be reclassified to profit or loss: Financial assets measured at fair value through other comprehensive income Total of items that will not be reclassified to profit or loss Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Total of items that may be reclassified subsequently to profit or loss Other comprehensive income, net of taxes Comprehensive income Attributable to: Owners of the parent Non-controlling interests Comprehensive income 3,009 3,009 488 488 3,497 1,077,231 1,077,698 (467) 1,077,231 (3,282) (3,282) 42,449 42,449 39,167 1,462,950 1,463,204 (253) 1,462,950 ―7― (3) Consolidated Statement of Changes in Equity Equity attributable to owners of parent Capital stock Capital surplus Treasury shares Retained earnings (Thousands of yen) Balance on January 1, 2020 1,185,030 1,086,703 (942) – 6,373 – 6,373 Profit Other comprehensive income Total comprehensive income Restricted Stock-based payment transactions Dividends Profit Other comprehensive income Total comprehensive income Restricted Stock-based payment transactions Dividends Purchase of treasury shares Total transactions with owners 6,373 6,373 Balance on December 31, 2020 1,191,403 1,093,077 (942) – 2,124 – 2,330 12,539 (1,739,062) Total transactions with owners 2,124 2,330 (1,726,523) Balance on December 31, 2021 1,193,528 1,095,407 (1,727,465) 3,117,416 1,074,183 1,074,183 (149,397) (149,397) 4,042,203 1,424,038 1,424,038 (166,061) (166,061) 5,300,180 Balance on January 1, 2020 Profit Other comprehensive income Total comprehensive income Restricted Stock-based payment transactions Dividends Total transactions with owners Balance on December 31, 2020 Profit Other comprehensive income Total comprehensive income Restricted Stock-based payment transactions Dividends Purchase of treasury shares Equity attributable to owners of parent Other components of equity Financial assets measured at fair value through other comprehensive income Exchange differences on translation of foreign operations Total Non-controlling interests Equity Total 4,514 5,392,722 286 5,393,009 3,515 3,515 1,074,183 3,515 1,077,698 12,747 (149,397) – (136,649) 8,029 6,333,772 1,424,038 16,993 (166,061) (1,739,062) (449) (17) (467) (180) (255) – 1,073,733 3,497 1,077,231 12,747 (149,397) (136,649) 6,333,591 1,423,783 16,993 (166,061) (1,739,062) 42,448 42,448 39,166 39,166 1 39,167 39,166 1,463,204 (253) 1,462,950 Total transactions with owners – – (1,888,129) – (1,888,129) Balance on December 31, 2021 42,954 47,195 5,908,847 (434) 5,908,412 4,514 3,009 3,009 – 7,523 (3,282) (3,282) – 4,241 – 505 505 – 505 ―8― – – – (4) Consolidated statements of cash flows Cash flows from operating activities Profit before income taxes Depreciation and amortization Impairment losses Finance income Finance costs Decrease (increase) in trade and other receivables Decrease (increase) in contract assets Increase (decrease) in trade and other payables Increase (decrease) in contract liabilities Increase (decrease) in provision Other Subtotal Interest received Dividends received Interest paid Income taxes paid Cash flows from operating activities Cash flows from investing activities Payments into time deposits Purchase of property, plant and equipment Purchase of intangible assets Purchase of securities Payments for lease and guarantee deposits Other Cash flows from investing activities Cash flows from financing activities Repayments of lease liabilities Cash dividends paid Purchase of treasury shares Cash flows from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of exchange rate change on cash and cash equivalents Cash and cash equivalents at end of period (Thousands of yen) Fiscal Year Ended December 31, 2020 Fiscal Year Ended December 31, 2021 1,549,343 283,030 5,196 (6,194) 6,035 (430,955) 39,542 85,887 168,029 (31,964) 121,928 1,789,880 8,855 93 (6,035) (463,438) 1,329,354 (7,316) (205,211) (19,636) (677) (370) 875 (232,336) (179,439) (149,377) – (328,817) 768,201 5,135,866 705 5,904,772 – 2,032,404 288,555 (1,952) 4,770 299,223 (1,937) (70,580) 89,618 (8,032) (58,846) 2,573,223 3,239 106 (4,770) (484,610) 2,087,187 (2,583) (1,797) (28,028) (689) (3,728) 1,934 (34,892) (182,701) (166,028) (1,739,413) (2,088,143) (35,848) 5,904,772 46,068 5,914,992 ―9― (5) Notes on consolidated financial statements (Note on the going-concern assumption) Not applicable (Segment information) (1) Summary of reportable segments The Group’s reportable segments are the Company’s structural units of which segregated financial information is available and that are subject to a periodical review by the Board of Directors so that allocation of management resources can be determined and financial results can be evaluated. The Group establishes Cloud Solutions and Digital Transformation as two separate reportable segments, and each of which plans and determines a strategy for the Group. The businesses included in each of the reportable segments are as follows: Cloud Solutions: development and sale, etc. of cloud-based enterprise systems Digital Transformation: provision of a variety of digitally-driven solutions that transform customer experience, such as planning of digital transformation strategies and digital marketing services including management of digital advertisements (2) Information on Reportable Segments Revenues and results for each reportable segment of the Group are as follows: Fiscal Year Ended December 31, 2020 (Thousands of yen) Reportable Segment Cloud Solution Digital Transformation Total Adjustments (Note 1) Consolidated Revenue from external customers 2,750,134 2,127,427 4,877,561 4,877,561 Total 2,750,134 2,127,427 4,877,561 4,877,561 Segment income 1,210,345 335,016 1,545,361 35,200 1,580,561 – – – – – – – – – – 6,251 37,469 1,549,343 283,030 5,196 Revenue Intersegment revenue Finance income Finance costs Profit before tax Other Depreciation and amortization 152,910 130,119 283,030 Impairment losses 5,196 5,196 (note) 1. The adjustment of 35,200 thousand yen to segment income mainly consists of “Other revenue” and “Other expense” that are not attributable to any reportable segment. 2. Segment income corresponds to operating profit in the consolidated statements of income. 3. Segment assets, segment liabilities, and capital expenditures are not presented since they are not subject to a review to determine the allocation of management resources and evaluate financial results. ―10― Fiscal Year Ended December 31, 2021 (Thousands of yen) Reportable Segment Cloud Solution Digital Transformation Total Adjustments (Note 1) Consolidated Revenue from external customers 3,133,803 2,397,094 5,530,898 5,530,898 Total 3,133,803 2,397,094 5,530,898 5,530,898 Segment income 1,485,999 519,436 2,005,435 22,526 2,027,962 – – – – – – – – – – – – – 10,102 5,659 2,032,404 Depreciation and amortization 161,996 126,559 288,555 288,555 (note) 1. The adjustment of 22,526 thousand yen to segment income mainly consists of “Other revenue” and “Other expense” that are not attributable to any reportable segment. 2. Segment income corresponds to operating profit in the consolidated statements of income. 3. Segment assets, segment liabilities, and capital expenditures are not presented since they are not subject to a review to determine the allocation of management resources and evaluate financial results. Revenue Intersegment revenue Finance income Finance costs Profit before tax Other Impairment losses (Information per share) Basic earnings per share and the basis for its calculation are as follows. Note that there are no potentially dilutive common shares. Fiscal Year Ended December 31, 2020 Fiscal Year Ended December 31, 2021 1,424,038 16,190,253 87.96 1,074,183 16,604,112 64.69 Profit attributable to owners of parent (thousands of yen) Average number of shares during the fiscal year (shares) Basic earnings per share (Yen) （Significant subsequent events) Not applicable ―11― Exemptions under IFRS 1 Japanese GAAP to IFRS. · Business combinations to IFRS. · Leases (First-time adoption） The Group has disclosed its consolidated financial statements in accordance with the International Financial Reporting Standards (hereinafter “IFRS”) since the current fiscal year. The most recent consolidated financial statements prepared in accordance with Japanese GAAP covered the fiscal year ended December 31, 2020, and the date of transition to IFRS from Japanese GAAP was January 1, 2020. IFRS requires that, in principle, an entity adopting IFRS for the first time (hereinafter, “First-time Adopter”) apply the standards under IFRS retrospectively. However, IFRS 1 “First-time Adoption of International Financial Reporting Standards” (hereinafter “IFRS 1”) provides some voluntary and mandatory exemptions from full retrospective applications. The effects of the application of such exemptions are adjusted to retained earnings or other components of equity on the date of transition to IFRS. The Group adopted the following exemptions upon its transition from A First-time Adopter may elect not to apply IFRS 3 “Business Combinations” (hereinafter “IFRS 3”) retrospectively to business combinations that occurred before the date of transition to IFRS. By applying this exemption, the Group has elected not to apply IFRS 3 retrospectively to business combinations that occurred before the date of transition to IFRS. · Exchange differences on translation of foreign operations IFRS 1 allows a First-time Adopter to elect to deem the cumulative translation differences for foreign operations to be zero at the date of transition to IFRS. The Group has elected to deem the cumulative translation differences for foreign operations to be zero at the date of transition IFRS 1 allows a First-time Adopter to determine whether an existing contract at the date of transition to IFRS contains a lease on the basis of facts and circumstances existing at the said date. In addition, IFRS 1 allows a First-time Adopter to measure a lease liability at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of transition to IFRS, as well as measure a right-of-use asset at an amount equal to the lease liability. The Group recognizes and measures leases using these exemptions. · Designation of financial instruments recognized before the date of transition to IFRS IFRS 1 allows a First-time Adopter to determine the classification of financial instruments under IFRS 9 “Financial Instruments” (hereinafter “IFRS 9”) on the basis of facts and circumstances existing at the date of transition to IFRS, rather than facts and circumstances existing at the time of initial recognition of such financial instruments. In addition, IFRS 1 allows a First-time Adopter to designate equity instruments as financial assets measured at fair value through other comprehensive income on the basis of facts and circumstances existing at the date of transition to IFRS. The Group determines the classification of financial instruments under IFRS 9 on the basis of facts and circumstances existing at the date of transition to IFRS, and designates equity instruments as financial assets measured at fair value through other comprehensive income. · Fair value measurement of financial instruments at initial recognition at initial recognition as well as the recognition of gain or loss on them. The Group has elected to prospectively apply the requirements of IFRS 9 on fair value measurement of financial assets and financial liabilities · Application of transitional measures under IFRS 15 “Revenue from Contracts with Customers” (hereinafter “IFRS 15”) IFRS 1 allows a First-time Adopter not to restate contracts that are completed contracts at the beginning of the earliest period presented and those that were modified before the beginning of the earliest period presented. The Group has applied the practical expedient not to restate contracts that were completed as of on January 1, 2020, which is the beginning of the earliest period presented, and those that were modified before the said date. ―12― (1) Mandatory exemptions under IFRS 1 IFRS 1 prohibits retrospective application of IFRS standards in relation to “Estimates,” “Derecognition of financial assets and financial liabilities,” “Non-controlling interests,” and “Classification and measurement of financial assets,” etc. The Group has prospectively applied the relevant IFRS standards on these transactions from the date of transition to IFRS. (2) Reconciliations The reconciliations required to be disclosed at the first-time adoption of IFRS are as follows. Note that in the reconciliation table below, “Reclassification” includes items that do not affect retained earnings and comprehensive income, and “Differences in recognition and measurement” includes items that affect retained earnings and comprehensive income. Reconciliation of equity as of January 1, 2020 (the date of transition to IFRS) Presentation under Japanese GAAP Japanese GAAP Reclassific ation Differences in recognition and measurement IFRS Notes Presentation under IFRS (Thousands of yen) Assets Current assets Cash and deposits 5,540,151 (404,285) Cash and cash equivalents Notes and accounts receivable -trade 949,045 27,132 5,135,866 976,178 242,305 242,305 Assets Current assets Trade and other receivables Contract assets 404,557 404,557 Other financial assets Work in process 397,076 (397,076) Raw materials and supplies 3,147 (36) (3,111) iii, xiv Other 93,118 (28,381) 103 64,840 i,ii,iii Other current assets Total current assets 6,981,527 (157,778) 6,823,748 Total current assets 415,939 841,386 1,257,326 xv, xvi Non-current assets Property, plant and equipment Allowance for doubtful accounts (1,012) 1,012 Non-current assets Property, plant and equipment Buildings Tools, furniture and fixtures 255,034 (255,034) 261,649 (261,649) Other 97,333 (97,333) Accumulated depreciation (198,076) 198,076 Intangible assets 27,799 27,799 Intangible assets Investment securities 11,526 97,663 109,190 iv Other financial assets Deferred tax assets 147,130 342,810 489,941 xvii Deferred tax assets Other 98,797 (98,645) 3,039 3,192 Other current assets Allowance for doubtful accounts (981) 981 Total investments and other assets 700,212 1,187,236 1,887,449 Total non-current assets Total assets 7,681,739 1,029,458 8,711,198 Total assets – – – – – – – – ii i xii ii xii i iv iv – – – – – – – – – – – – – – – – – – – – – ―13― Presentation under Japanese GAAP Japanese GAAP Reclassific ation Differences in recognition and measurement IFRS Notes Presentation under IFRS (Thousands of yen) Liabilities and equity Liabilities Current liabilities Liabilities Current liabilities Notes and accounts payable -trade 189,384 179,861 – 369,246 v Trade and other payables 49,682 22,932 1,166,547 1,216,230 vi,xii Contract liabilities 159,859 182,791 vii,xvi Lease liabilities Income taxes payable 277,570 (28,110) 249,460 Income tax payables Provision for bonuses 51,420 (51,420) – Provision for loss on order received 250,284 2,822 (211,261) 41,845 viii,xii Provisions Other 544,504 (175,768) 368,735 Other current liabilities ix v,vi,vii,viii,ix Total current liabilities 1,313,163 1,115,146 2,428,310 Total current liabilities Non-current liabilities Asset retirement obligations Other Total non-current liabilities Total liabilities Net assets Capital stock Capital surplus Treasury shares Retained earnings Accumulated other comprehensive income 74,401 685,324 759,725 vii,xvi Lease liabilities 116,495 13,657 130,153 x Provisions 88,058 (88,058) – vii,x 685,324 889,878 1,800,470 3,318,188 Non-current liabilities Other Total non-current liabilities Total non-current liabilities Total liabilities Equity 1,185,030 Capital stock (8,326) 1,086,703 xviii Capital surplus (942) Treasury shares (772,065) 3,117,416 Retained earnings xxi xx 9,379 4,514 Other components of equity (771,012) 5,392,722 Equity attributable to owners of the parent Non-controlling interests 286 – 286 xix Non-controlling interests Total net assets 6,164,021 (771,012) 5,393,009 Total equity Total liabilities and net assets 7,681,739 1,029,458 8,711,198 Total liabilities and equity – – – 204,554 1,517,718 1,185,030 1,095,030 (942) 3,889,482 (4,865) 6,163,734 – – – – – – – – – – – – – – – – – – – ―14― Reconciliation of equity as of December 31, 2020 (the preparation date of the most recent consolidated financial statements under Japanese GAAP) Presentation under Japanese GAAP Japanese GAAP Reclassific ation Differences in recognition and measurement IFRS Notes Presentation under IFRS (Thousands of yen) Cash and deposits 6,293,840 (389,068) Cash and cash equivalents Notes and accounts receivable -trade 1,370,614 34,191 5,904,772 1,404,805 202,762 202,762 Assets Current assets Trade and other receivables Contract assets Assets Current assets 389,713 389,713 Other financial assets Work in process 153,376 (153,376) Raw materials and supplies 3,073 (39) (3,033) iii,xiv Other 100,355 (35,916) 216 64,655 i,ii,iii Other current assets Total current assets 7,920,138 46,570 7,966,709 Total current assets 454,454 666,628 1,121,083 xv,xvi Non-current assets Property, plant and equipment Allowance for doubtful accounts (1,120) 1,120 Non-current assets Property, plant and equipment Buildings Tools, furniture and fixtures 253,750 (253,750) 410,240 (410,240) Other 75,112 (75,112) Accumulated depreciation (284,648) 284,648 Intangible assets 31,233 31,233 Intangible assets Investment securities 16,541 96,603 113,144 iv Other financial assets Deferred tax assets 88,624 393,425 482,050 xvii Deferred tax assets Other 98,290 (97,518) 5,450 6,222 Other current assets Allowance for doubtful accounts (915) 915 Total investments and other assets 688,229 1,065,505 1,753,734 Total non-current assets Total assets 8,608,368 1,112,075 9,720,443 Total assets – – – – – – – – ii i xii ii xii i iv iv – – – – – – – – – – – – – – – – – – – – – ―15― Liabilities and equity Liabilities Current liabilities Liabilities Current liabilities Notes and accounts payable -trade Presentation under Japanese GAAP Japanese GAAP Reclassific ation Differences in recognition and measurement IFRS Notes Presentation under IFRS (Thousands of yen) – – – 173,271 1,391,550 1,193,528 1,103,528 (942) 4,922,166 (1,463) 7,216,818 288,743 120,045 – 408,789 v Trade and other payables 46,435 16,876 1,337,178 1,383,613 vi,xii Contract liabilities 159,197 176,073 vii,xvi Lease liabilities Income taxes payable 280,526 (25,459) 255,066 Income tax payables Provision for bonuses 53,222 (53,222) – Provision for loss on order received 30,132 9,667 (27,854) 11,945 viii,xii Provisions Other 565,653 (114,342) 4,249 455,560 Other current liabilities ix v,vi,vii,viii,ix Total current liabilities 1,218,278 1,472,771 2,691,049 Total current liabilities Non-current liabilities Asset retirement obligations Other Total non-current liabilities Total liabilities Net assets Capital stock Capital surplus Treasury shares Retained earnings Accumulated other comprehensive income 45,264 522,531 567,796 vii,xvi Lease liabilities 114,799 13,207 128,006 x Provisions 58,471 (58,471) – vii,x 522,531 695,802 1,995,302 3,386,852 Non-current liabilities Other Total non-current liabilities Total non-current liabilities Total liabilities Equity (2,124) 1,191,403 Capital stock (10,451) 1,093,077 xviii Capital surplus (942) Treasury shares (879,963) 4,042,203 Retained earnings xxi xx 9,492 8,029 Other components of equity (883,046) 6,333,772 Equity attributable to owners of the parent Non-controlling interests – (180) (180) xix Non-controlling interests Total net assets 7,216,818 (883,227) 6,333,591 Total equity Total liabilities and net assets 8,608,368 1,112,075 9,720,443 Total liabilities and equity – – – – – – – – – – – – – – – – – ―16― Reconciliation of profit or loss and comprehensive income for the fiscal year ended December 31, 2020 (the most recent fiscal year for which the consolidated financial statements were prepared under Japanese GAAP) Presentation under Japanese GAAP Japanese GAAP Reclassific ation Differences in recognition and measurement IFRS Notes Presentation under IFRS (Thousands of yen) Net sales Cost of sales Gross profit Selling, general and administrative expenses 5,240,816 (2,980) (360,274) 4,877,561 xii,xiii Revenue 2,138,168 3,949 (170,428) 1,971,689 Cost of sales xi,xii,xiii, xv,xvi 3,102,648 (6,930) (189,846) 2,905,871 Gross profit 1,395,157 (49,114) (34,340) 1,311,702 xi,xiv,xv, xvi Selling, general and administrative expenses Research and development Other income Other expenses Operating profit 1,707,490 28,576 (155,505) 1,580,561 Operating profit Non-operating income 45,994 (45,994) Non-operating expenses 40,364 (40,364) 6,251 Finance income 3,078 37,469 xi,xvi Finance costs Extraordinary losses 5,196 (5,196) – xi Profit before income taxes 1,707,924 – (158,580) 1,549,343 Profit before tax Income taxes -current 469,047 57,178 (50,615) 475,609 xi,xvii Income tax expenses Income taxes -deferred 57,178 (57,178) – xi Profit 1,181,698 (107,965) 1,073,733 Profit – – – – – 3,009 3,009 488 48,807 42,781 7,581 6,248 34,391 – – – – – – Other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment – – – – – 3 – – – – – 48,807 42,781 7,581 – – 3,009 3,009 488 xi xi xi xi xi xi Other comprehensive income Items that will not be reclassified to profit or loss: Financial assets measured at fair value through other comprehensive income Total of items that will not be reclassified to profit or loss Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Total of items that may be reclassified subsequently to profit or loss Other comprehensive income, net of taxes 488 – – 488 Total other comprehensive income 3,497 – 3,497 Comprehensive income 1,185,196 (107,965) 1,077,231 Comprehensive income ―17― Reconciliation of cash flow for the fiscal year ended December 31, 2020 (the most recent fiscal year for which the consolidated financial statements were prepared under Japanese GAAP) Under Japanese GAAP, rent payments for real estate leases were classified as cash flows from operating activities. However, under IFRS, expenditures from repayment of lease liabilities are classified as cash flows from financing activities since a lessee is required, in principle, to recognize lease liabilities for all leases that fall within the scope of IFRS 16 “Leases.” Accordingly, cash flows from financing activities decreased by 159,102 thousand yen, and cash flows from operating activities increased by the same amount. (3) Notes to reconciliation (Reclassification) (i) Trade and other receivables IFRS. Accounts receivable – other included in “Other” in current assets under Japanese GAAP, is reclassified as “Trade and other receivables” under “Allowance for doubtful accounts (current),” which was separately presented under Japanese GAAP, is presented on a net basis by directly deducting the item from “Trade and other receivables” under IFRS. (ii) Other financial assets (current) Time deposits with maturities of more than three months included in “Cash and deposits” and short-term loans receivable, etc. included in “Other” in current assets under Japanese GAAP, are reclassified as “Other financial assets (current)” under IFRS. “Raw materials and supplies,” which was separately presented under Japanese GAAP, is reclassified as “Other current assets” under IFRS. (iii) Inventories (iv) Other financial assets (non-current) “Investment securities” and “Other” (Long-term loans receivable, Lease and guarantee deposits, etc.), which were separately presented under Japanese GAAP, are reclassified as “Other financial assets (non-current)” under IFRS. “Allowance for doubtful accounts (non-current)” which was separately presented under Japanese GAAP, is presented on a net basis by directly deducting the item from “Other financial assets (non-current)” under IFRS. Accounts payable – other included in “Other” in current liabilities under Japanese GAAP, is reclassified as “Trade and other payables” under Advances received included in “Other” in current liabilities under Japanese GAAP is reclassified as “Contract liabilities” under IFRS. Lease obligations included in “Other” in current liabilities and non-current liabilities under Japanese GAAP are reclassified as “Lease liabilities (current)” and “Lease liabilities (non-current)” respectively under IFRS. “Provision for loss on order received,” etc., which were separately presented under Japanese GAAP, are reclassified as “Provisions (current)” (v) Trade and other payables IFRS. (vi) Contract liabilities (vii) Lease liabilities (viii) Provisions (current) under IFRS. (ix) Other current liabilities “Provision for bonuses,” etc., which were separately presented under Japanese GAAP, are reclassified as “Other current liabilities” under IFRS. ―18― “Asset retirement obligations,” etc., which were separately presented under Japanese GAAP, are reclassified as “Provisions (non-current)” under (x) Provisions (non-current) IFRS. (xi) Items representing profits or losses expenses” under IFRS. R&D expenses included in “Selling, general and administrative expenses” under Japanese GAAP, is reclassified as “Research and development For items presented as “Non-operating income,” “Non-operating expenses,” and “Extraordinary losses” under Japanese GAAP, impairment loss is reclassified as “Cost of sales” and “Selling, general and administrative expenses,” and finance-related profits or losses are reclassified as “Finance income” and “Finance costs,” and the rest of them are reclassified as “Other income” and “Other expenses” under IFRS. “Income taxes – current” and “Income taxes – deferred,” which were separately presented under Japanese GAAP, are combined and presented as “Income tax expense” under IFRS. (Differences in Recognition and Measurement) (xii) Adjustments to trade receivables and inventories due to the change of timing of revenue recognition Under Japanese GAAP, revenue was recognized on an acceptance basis for software license sales under purchase-type contracts; the completed-contract method was applied to contracts for installation support, customization, and system production where the contract outcome was not reliably estimated in terms of progress. Under IFRS, revenue is recognized over time for transactions in which control of a good or service is transferred to the customer over time, regardless of the type of contract. Accordingly, “Contract assets,” “Inventories,” “Contract liabilities,” “Provisions,” “Revenue,” and “Cost of sales” are adjusted. (xiii) Adjustments to presentation of revenue presented on a net basis under IFRS. Of the transactions presented on a gross basis under Japanese GAAP, those in which the Group is judged to have been engaged as an agent are (xiv) Adjustments to goods for sales promotion and advertising Goods for sales promotion and advertising included in “Raw materials and supplies” under Japanese GAAP are expensed since they do not meet the definition of assets under IFRS. reviewed and changed accordingly. liabilities for such leases. (xv) Changes in the estimated useful lives of property, plant and equipment Upon the adoption of IFRS, the useful lives of certain property, plant and equipment (of which lease components cannot be segregated) have been (xvi) Recognition of the right-of-use assets and lease liabilities Under Japanese GAAP, real estate leases were expensed as rent expense. Under IFRS, the Group recognizes the right-of-use assets and lease (xvii) Review of recoverability of deferred tax assets Upon the adoption of IFRS, recoverability of all the deferred tax assets has been reviewed. (xviii) Deduction of stock issuance cost IFRS, such costs are deducted directly from “Capital surplus.” Under Japanese GAAP, transaction costs related to the issuance of equity instruments of the Company were recognized in profit or loss. Under (xix) Attribution of total comprehensive income to non-controlling interests Under Japanese GAAP, if non-controlling interests have a deficit balance, such deficit was attributed to parent’s ownership interests, which under IFRS is attributed to owners of parent and non-controlling interests. ―19― (xx) Transfer of cumulative translation differences of overseas subsidiaries Upon the first-time adoption of IFRS, the Company applied the exemption as set forth in IFRS 1 and transferred the total amount of cumulative translation differences on the date of transition to IFRS to retained earnings. (xxi)Adjustments to retained earnings IFRS Transition Date (January 1, 2020) (Thousands of yen) As of December 31, 2020 (1,166,547) (1,337,178) time revenue recognition for Over time recognition of revenue from sales of software licenses under one-time purchase contracts Over installation support and customization services, etc. of ZAC according to the progress toward completion measured using the input method based on costs incurred Transfer of stock issuance costs expensed in prior periods to capital surplus Exemptions for the first-time adoption of IFRS (adjustments to exchange differences) Transfer to non-controlling interests Subtotal Adjustment for tax effects Other Total 56,490 12,001 (9,379) – (3,765) (1,111,201) 339,135 (772,065) 77,241 12,001 (9,379) 68 (12,466) (1,269,714) 389,751 (879,963) ―20―