九州旅客鉄道(9142) – Matters for Internet Disclosure Under Laws and Regulations and the Articles of Incorporation

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開示日時:2022/05/18 08:00:00

損益

決算期 売上高 営業益 経常益 EPS
2018.03 41,337,100 6,396,400 6,452,300 315.07
2019.03 44,035,800 6,388,600 6,433,900 307.75
2020.03 43,264,400 4,940,600 5,006,500 198.16
2021.03 29,391,400 -2,287,300 -1,963,300 -120.83

※金額の単位は[万円]

株価

前日終値 50日平均 200日平均 実績PER 予想PER
2,361.0 2,468.84 2,506.705 13.67

※金額の単位は[円]

キャッシュフロー

決算期 フリーCF 営業CF
2018.03 536,600 8,768,900
2019.03 -6,446,400 4,147,300
2020.03 -4,947,900 6,046,800
2021.03 -10,556,600 -1,036,100

※金額の単位は[万円]

▼テキスト箇所の抽出

(Translation) Matters for Internet Disclosure Under Laws and Regulations and the Articles of Incorporation 35th Fiscal Year (April 1, 2021 to March 31, 2022) Systems for Ensuring the Appropriateness of Business Activities and the Operation Status of the Systems Consolidated Statements of Changes in Net Assets Notes to Consolidated Financial Statements Non-Consolidated Statements of Changes in Net Assets Notes to Non-Consolidated Financial Statements Kyushu Railway Company In accordance with laws and regulations and the Company’s Articles of Incorporation, this information is posted on the Company’s website (https://www.jrkyushu.co.jp) to provide it to shareholders. 6 Systems for Ensuring the Appropriateness of Business Activities and the Operation Status of the Systems The Board of Directors resolved the following with regard to the system for ensuring that the business execution of directors of the Company and Group companies complies with laws, regulations and the Articles of Incorporation, and other systems for ensuring the appropriateness of operations. (1) System for Ensuring the Business Execution of Directors and Employees of the Company and Group Companies Complies with Laws, Regulations, and the Articles of Incorporation The Company has formulated the JR Kyushu Group’s Code of Ethics to serve as a standard that works to reinforce corporate ethics with each officer (including corporate officers, which includes senior corporate officers; the same applies hereinafter) and employee of the Company and Group companies and ensure compliance with laws and regulations. The Administration Department has been put in charge of implementing this code group-wide and also carries out employee training and other initiatives. In addition, the Audit and Supervisory Committee conducts audits and other tasks with respect to the Company’s directors, while the Auditing Department, which acts as the internal audit function, audits the status of compliance with laws and regulations among employees of the Company and Group companies, and reports regularly to the Board of Directors and the Audit and Supervisory Committee. (2) System for Storing and Managing Information Related to the Business Execution of Directors of the Company In accordance with regulations for the management of written documents, information related to the business execution of the Company’s directors is recorded in written documents and through an electromagnetic medium (hereinafter, “documents, etc.,” collectively) is then stored. The documents, etc., can be viewed at any time by the Company’s directors. (3) Regulations and Other Systems for Managing the Risk of Loss at the Company and Group Companies Securing railway safety is the most important management issue for the Company. In accordance with safety management regulations created based on the revised Railway Business Act, which was enacted in October 2006, the Company has established a safety management system and works to ensure, maintain, and improve transportation safety. Safety promotion committees have been established at the head office. These committees carry out initiatives toward preventing operational accidents and work-related injuries. Through training and other methods, these committees make thorough efforts to ensure the Company can make prompt responses in the event of large-scale accidents or natural disasters. For risks that would have a significant impact on the Company’s business operations, the 1 Company will establish regulations at each division that oversees operations and put in place crisis management systems in order to ensure that an appropriate response is made in the event an issue arises. The Company has established the Group Executive Committee, which oversees the management of Group companies. The Group Executive Committee is made up of mainly the Company’s corporate officers. The Committee ensures that systems are in place that allow for management to be conducted in an appropriate manner. In addition, the Committee supervises and monitors the management of Group companies by holding discussions on key management issues for the JR Kyushu Group based on regulations for business administration at affiliated companies. Furthermore, in addition to establishing relevant departments and designating officers to help support and oversee Group management, the Company works to improve its governance by assigning its officers and employees to work as part-time directors and part-time auditors at Group companies. (4) Systems for Ensuring Effective Business Execution by Directors of the Company and Group Companies The Company’s Board of Directors delegates a portion of authority to the directors for execution of important operations when necessary on the basis of the Articles of Incorporation and resolutions of the Board of Directors. Meanwhile, the Company’s Board of Directors also determines the area in charge undertaken by each corporate officer, and ensures that systems are in place to allow each director and corporate officer to perform his or her assigned work in an efficient manner. In addition, the Company clarifies the authority and responsibilities of each director, corporate officer and employee through the Guidelines on Administrative Authorities, thereby securing an effective system for business execution. For Group companies, the Company ensures an effective system for business execution through the establishment of regulations related to the division concerning segregation of duties, the chain of command, authority, decision making, and other organizational matters. (5) Systems for Ensuring the Appropriateness of Business Activities at the Company and Group Companies In order to establish corporate ethics and reinforce compliance with laws and regulations, the Company and Group companies have formulated the JR Kyushu Group’s Code of Ethics and established the JR Kyushu Group Corporate Ethics Committee, which deliberates issues related to corporate ethics and compliance. Furthermore, the Company operates the JR Kyushu Group Corporate Ethics Hotline (hereinafter, “the Corporate Ethics Hotline”), which serves as a means for employees of the Company or Group companies, as well as employees of business partners, to directly provide information regarding actions that may potentially be in violation of laws and regulations. The Company and Group 2 companies maintain a resolute attitude toward antisocial forces, such as crime syndicates, companies affiliated with crime syndicates, and corporate extortionists, and rejects any kind of relationship with such organizations. (6) Systems for Reporting to the Company Facts Pertaining to Business Execution of Group Company Directors and Employees The Company has provided regulations for business administration at affiliated companies. Group executive strategy and other crucial items are communicated through review and reporting systems for the Group Executive Committee, which comprises mainly the Company’s corporate officers. Moreover, the Company ensures a system for regular reporting on Group companies’ operating results and financial conditions. Supervisory Committee (7) Items Regarding Employees Who Are to Assist with the Duties of the Company’s Audit and The Company’s Audit and Supervisory Committee members have the authority to instruct Audit and Supervisory Committee Office employees on items necessary to activities of the Audit and Supervisory Committee. In addition, Audit and Supervisory Committee Office employees will not receive guidance from directors (excluding directors who are Audit and Supervisory Committee members) or others with regard to those instructions. (8) Systems for Reporting to Audit and Supervisory Committee by Company and Group Company Directors and Employees The Company ensures a system for Company and Group company directors, corporate officers, and employees to promptly report conduct to Audit and Supervisory Committee that may be in violation of laws, etc., or behavior that will have a major impact on the Company or Group companies. Moreover, matters provided for in laws and regulations, the implementation status of internal audits and the contents of messages provided through the Corporate Ethics Hotline are regularly reported to Audit and Supervisory Committee, as stipulated by law. Regarding the Corporate Ethics Hotline, the privacy of persons making reports will be strictly observed, and that such persons will not be treated adversely by reason of the report or consultation to the Hotline. 3 strengthening cooperation. activities is as follows. Regulations reported. (9) Items Regarding Policy on Prepayment of Fees or Reimbursement Procedures and Costs or Discharge of Debt for Performance of Duties by the Company’s Audit and Supervisory Committee Members The Company secures a budget for views related to the execution of audits on a yearly basis. (10) Other Systems for Securing Effective Auditing by Audit and Supervisory Committee The Company’s Audit and Supervisory Committee conducts regular roundtable discussions with the president and outside directors (excluding directors who are Audit and Supervisory Committee members). Moreover, Audit and Supervisory Committee regularly conduct roundtable discussions with the Internal Audit Department, accounting auditors, and Group company auditors, thus The overview of the operation status of the systems for ensuring the appropriateness of business (1) Initiatives for Establishing Corporate Ethics and Reinforcing Compliance with Laws and 1 At the JR Kyushu Group Corporate Ethics Committee, the status of initiatives regarding corporate ethics in the Group, the operation status of the Corporate Ethics Hotline, etc. were 2 The Company provided training and education on compliance with laws and regulations for officers and employees of the Company and Group companies. In addition, the Company conducted a survey in the Company in order to ascertain employee awareness of corporate ethics. 3 In order to eliminate any relationship with anti-social forces, the Company worked to include exclusion clauses in contracts, etc. and conduct thorough credit investigations. (2) Initiatives for Ensuring the Appropriateness and Effectiveness of the Business Execution of 1 Minutes of meetings of the Board of Directors and documents, etc. related to the business execution of directors were recorded and stored appropriately in accordance with laws, Directors and Employees regulations, etc. 2 In order to secure the effectiveness of the Board of Directors, the Company carried out an investigation using questionnaires for the directors to analyze and evaluate that effectiveness. The results of the investigation were reported to the Board of Directors, the related issues were shared among them, and various improvements were made based on the investigation results. 4 3 The Auditing Department conducts internal audits of the Company and Group companies and reports the results of the audits to the Board of Directors and the Audit and Supervisory 4 The Company made partial changes to the organization to secure a more effective system for Committee. business execution. (3) Initiatives for Managing the Risk of Loss 1 The Safety Promotion Committee established measures for preventing the occurrence and recurrence of railway accidents, transport disruptions, etc. The Safety Promotion Committee also ensured that the measures are disseminated to Group companies, and strongly promoted the measures to unite the entire Group. 2 The Company conducted audits, etc. in regard to a safety control structure through the Audit and Supervisory Committee and Safety Management Department. 3 The Group Executive Committee held appropriate discussions and issued reports on important matters related to Group management. The Group Executive Committee also reported the operating results of Group Companies and other information to the Company’s Board of Directors. (4) Initiatives for Securing Effective Auditing by the Audit and Supervisory Committee 1 The Company secured a budget for expenses deemed necessary for the execution of duties by Audit and Supervisory Committee Members. 2 The Audit and Supervisory Committee regularly exchanged opinions with the president and outside directors (excluding directors who are Audit and Supervisory Committee members). 3 The Audit and Supervisory Committee regularly received reports from the Auditing Department on the status of internal audits and other matters, as well as regularly exchanged opinions with accounting auditors and Group company auditors on the status of audits, issues, etc. 5 Consolidated Statements of Changes in Net Assets (From April 1, 2021 to March 31, 2022) Shareholders’ equity (Millions of yen) Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Balance at the beginning of current period 16,000 224,021 150,017 (594) 389,445 Restated balance 16,000 224,021 149,319 (594) 388,747 (698) (698) 1,826 (14,629) 13,250 (0) 2 (14,629) 13,250 (0) 2 1,826 Cumulative effects of changes in accounting policies Changes during current period Dividends of surplus Net income attributable to owners of the parent Purchase of treasury shares Disposal of treasury stock Purchase of shares of consolidated subsidiaries Net changes in items other than shareholders’ equity during current period Total changes during current period – 1,826 (1,378) 2 450 Balance at the end of current period 16,000 225,847 147,941 (591) 389,198 6 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Remeasure-ments of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Balance at the beginning of current period 7,079 (186) (6,148) 743 5,218 395,408 Restated balance 7,079 (186) (6,148) 743 5,218 394,709 Cumulative effects of changes in accounting policies Changes during current period Dividends of surplus Net income attributable to owners of the parent Purchase of treasury shares Disposal of treasury stock Purchase of shares of consolidated subsidiaries Net changes in items other than shareholders’ equity during current period Total changes during current period Balance at the end of current period (698) (14,629) 13,250 (0) 2 1,826 (2,297) (254) 942 (1,610) (4,526) (6,136) (2,297) 4,781 (254) (441) 942 (1,610) (4,526) (5,685) (5,206) (866) 692 389,024 (Note) The above figures are rounded down to the nearest ¥1 million. 7 I Notes on Important Matters for Basis of Presentation of Consolidated Financial Statements Notes to Consolidated Financial Statements 1. Scope of consolidation (1) The scope of consolidation includes 44 companies including significant subsidiaries indicated in “(8) Major parent companies and subsidiaries” of the Business Report. The newly founded JR Kyushu Asset Management Co., Ltd (founded on April 1, 2021), JR Kyushu Corporate Investment LLC. (founded on April 1, 2021), and Nurubon Inc. (founded on August 10, 2021) are included in the scope of consolidation from the fiscal year ended March 31, 2022. The former consolidated subsidiary JR Kyushu Hotels And Resorts Holdings Inc. has been excluded from the scope of consolidation from the fiscal year ended March 31, 2022 due to the completion of its liquidation. (2) Names of major non-consolidated subsidiaries Names of main non-consolidated subsidiaries: 10 companies, including Kyutetsu Built Co., Ltd. Reasons for excluding from the scope of consolidation All of the non-consolidated subsidiaries are small in scale, and their total assets, operating revenue, net income (multiplied by the Company’s ownership percentage) and retained earnings (multiplied by the Company’s ownership percentage) do not have a material effect on the consolidated financial statements and have therefore been excluded from the scope of consolidation. 2. Application of equity method (1) There are no non-consolidated subsidiaries accounted for under the equity method. (2) There are four affiliates, including JR Kyushu Secom Inc., accounted for under the equity method. (3) Kyutetsu Built Co., Ltd. and other non-consolidated subsidiaries not accounted for under the equity method, and Hakata Station Building Co., Ltd. and other affiliates are excluded from the scope of applying the equity method as they will have minimal impact on net income (multiplied by the Company’s ownership percentage) and retained earnings (multiplied by the Company’s ownership percentage) and are not material as a whole. (4) Special notes on application of equity method Among those affiliates to which the equity method is applied whose fiscal year-end and consolidated fiscal year-end differ, the non-consolidated financial statements of the most recent fiscal year of each subsidiary are used. 8 3. Fiscal years of consolidated subsidiaries Of the consolidated subsidiaries, the fiscal year-end of Manbou Corp. is the end of February, and the fiscal year-end of JR Kyushu Capital Management (Thailand) Co., Ltd., JR Kyushu Business Development (Thailand) Co., Ltd., and JR Kyushu Corporate Investment LLC. is the end of December. The consolidated financial statements of these subsidiaries were prepared using the non-consolidated financial statements dated as of those dates. However, the adjustments needed for consolidation were made for all the important transactions between consolidated companies that took place between those dates and the consolidated fiscal year-end. 4. Accounting policies (1) Basis and method of valuation of significant assets (i) Securities Held-to-maturity debt securities: Stated at amortized cost (straight-line method). Other securities (including money held in trust): Those other than “shares etc. without market value” are stated at fair value based on the market price as of the fiscal year-end. (Unrealized gains and losses are included in a separate component of net assets, and cost of sales is determined based on the moving-average method.) Shares etc. without market value are stated at cost, determined by the moving-average method. Investments in limited liability investment partnerships and similar investments (defined as securities in Article 2, paragraph (2) of the Financial Instruments and Exchange Act (Act No. 25 of April 13, 1948)) are measured at net amounts equivalent to the equity interest in the partnerships based on their latest available financial statements whose reporting date is stipulated in the partnership agreement. (ii) Derivatives Stated at fair value. (iii) Inventories as the basis of valuation. The cost method (method to write down book value due to lower profitability) is adopted Merchandise: Stated mainly using the specific identification method. Real estate for sale: Stated using the specific identification method. Real estate for sale in process: Stated using the specific identification method. Supplies: Stated mainly using the moving-average method. Other: Stated mainly using the last purchase price method. 9 (2) Depreciation method for significant depreciable assets (i) Property, plant and equipment (excluding lease assets) Stated mainly using the straight-line method. However, the following assets are stated using the following methods. method. Replacement assets of fixed assets for railway business: Stated using the replacement (Changes to accounting policies that were difficult to differentiate from changes to accounting estimates, and changes to accounting estimates) (Changes to the depreciation method and useful life of property, plant and equipment) Regarding the depreciation method for property, plant and equipment, the Company previously mainly utilized the declining-balance method, but from the fiscal year ended March 31, 2022, the straight-line method is primarily used. In the railway business, current rolling stock is aging, and the Medium-Term Business Plan calls for the development and expanded implementation of energy-saving rolling stock for the purpose of efficient energy use. In line with this policy, the Company is proceeding with new production such as the 821 series AC suburban-type rolling stock and YC1 series storage battery-equipped diesel-electric rolling stock as replacements for conventional line rolling stock. Also, going forward, the Company plans to make new investments in high-cost rolling stock such as new production of Shinkansen rolling stock for the opening of the Western Kyushu Shinkansen. In response to such changes in the business environment and future investment plans in the railway business, as a result of reexamining the pattern of future consumption of the economic benefits of property, plant and equipment as a whole including the railway business, the Company decided that changing the depreciation method for property, plant and equipment to use primarily the straight-line method from the fiscal year ended March 31, 2022, would reflect the economic reality more appropriately. In addition, for the useful life of property, plant and equipment, the same standards as those stipulated in the Corporation Tax Act were formerly applied, but with the change in the depreciation method, from the fiscal year ended March 31, 2022, the Company has revised the useful life to the economic useful life expectancy. This revision was decided by giving comprehensive consideration to the physical useful life of property, plant and equipment, as well as factors such as its track record of usage. As a result of these changes, operating income, ordinary income and income before income taxes for the fiscal year ended March 31, 2022, have each increased 3,470 million yen compared to the former method. 10 (ii) Intangible assets (excluding lease assets) Software: Internal-use software is stated using the straight-line method. The amortization period is the internal useful life (5 years). Other intangible assets: Stated using the straight-line method. (iii) Lease assets Lease assets in finance lease transactions that do not transfer ownership: Depreciated using the straight-line method with the lease term as the useful life and a residual value of zero. (iv) Long-term prepaid expenses: Stated using the straight-line method. (3) Accounting standards for significant allowances (i) Allowance for doubtful accounts To prepare for losses from bad debt, an estimated uncollectible amount is provided at the amount estimated by either using the historical rate of credit loss in the case of general receivables, or based on individual consideration of collectibility in the case of specific receivables such as highly doubtful receivables. (ii) Accrued bonuses To prepare for the payment of employee bonuses, the estimated amount to be paid is stated. (iii) Allowance for safety and environmental measures To prepare for the expenses for safety and environmental measures, repairs, etc. for railway facilities, etc. to ensure safe railway operations, the estimated costs are stated. (iv) Allowance for disaster-damage losses To prepare for disaster recover expenses, etc., the estimated costs are stated. (4) Accounting method for retirement benefits (i) Method of attributing projected retirement benefits to periods When calculating retirement benefit obligations, the benefit formula method is used to attribute the projected retirement benefits to the period until the end of the current fiscal year. (ii) Method of amortization of actuarial gain or loss and past service cost Actuarial gain or loss is mainly amortized on a straight-line basis over periods (12 years) within the average remaining years of service of the employees in the year following the year in which the gain/loss was incurred. Past service cost is mainly amortized on a straight-line basis over periods (19 years) within the average remaining years of service of the employees. (5) Accounting standards for significant revenue and expenses The main obligations in the Group’s major businesses and the usual points in time at which revenue is recognized are as follows. Furthermore, among the obligations under contracts with customers in each business, for transactions in which the Group’s role in providing goods or 11 services to customers is that of an agent, revenue is recognized at the net amount received from customers with the amount paid to suppliers deducted. (i) Transportation Group In the transportation business, the main obligation is providing transportation services based on transportation contracts with customers. Regarding commuter passes, obligations are considered to be fulfilled once the expiration date of a commuter pass has passed, and revenue is recognized over a certain period of time. Regarding tickets other than commuter passes, obligations are considered to be fulfilled from the point when a transportation service is provided by use of the ticket, and revenue is recognized at one point in time. In addition, compensation for transportation-service-related transactions is generally received in advance. (ii) Construction Group In the construction business, the main obligation is conducting civil engineering and building work and the like based on contract work agreements with customers. Under contract work agreements, obligations are considered to be fulfilled over a certain period of time, the degree of progress toward fulfillment of the obligations is estimated, and revenue is recognized over a certain period of time based on the degree of progress. The method for estimating degree of progress is calculated as the ratio of costs incurred to the estimated total cost. For contracts under which the degree of progress cannot be reasonably estimated, revenue is recognized in an amount equal to the portion of the costs incurred that is expected to be recovered. (iii) Real Estate and Hotels Group In the real estate lease business, the Company primarily manages and operates commercial facilities, offices, and apartment buildings, and leases these units based on building lease agreements and other agreements. Regarding building lease agreements and other agreements, revenue is recognized in the scope of the agreement period based on the “Accounting Standard for Lease Transactions.” In the real estate sale business, the Company primarily sells condominiums and has obligations to deliver condominiums based on real estate sales agreements with customers. These obligations are considered to be fulfilled when control of the relevant property is transferred to the customer, and revenue is recognized from the point in time when the condominium was delivered. In the hotel business, the main obligation is providing accommodation services based on accommodation agreements with customers. These obligations are considered to be fulfilled 12 when accommodation service is provided to the customer, and revenue is recognized at one point in time. (iv) Retail and Restaurant Group In the retail and restaurant business, the Company primarily sell products in stores and has obligations to deliver products based on sales contracts with customers. These obligations are considered to be fulfilled at the point when the product is sold and control of said product is transferred to the customer, and revenue is recognized at the point in time when the product is delivered. (v) Other Group In the construction machinery sales business, the Company primarily sells construction machinery, and has obligations to deliver construction machinery based on sales contracts with customers. These obligations are considered to be fulfilled when control of said construction machinery is transferred to the customer, which is when the construction machinery is delivered, and revenue is recognized at the point in time when the construction machinery is delivered. (6) Treatment of construction grants The Company receives construction grants from municipal governments and others to aid in construction and improvement of railways and other properties, such as construction of elevated railway tracks for grade separation and construction for widening railway crossings. Such construction grants are recognized by deducting the amount equivalent to the contribution for construction received at the completion of the construction directly from the acquisition cost of the fixed assets. In the consolidated statements of income, the construction grants received are recognized in extraordinary gains, and the amount deducted directly from the acquisition cost of the fixed assets is recognized in extraordinary losses as losses from provision for cost reduction of fixed assets. (7) Amortization of goodwill and negative goodwill Goodwill and negative goodwill (arising from transactions that occurred on or before March 31, 2010) are amortized using the straight-line method, mostly over 20 years. (8) Adoption of the Consolidated Taxation System The Company and some consolidated subsidiaries in Japan are applying the Consolidated Taxation System from the fiscal year ended March 31, 2022. (9) Adoption of the tax effect accounting for the transition from the consolidated taxation system to the group tax sharing system The Company and some consolidated subsidiaries in Japan are transitioning from the consolidated taxation system to the group tax sharing system from the fiscal year ending March 13 31, 2023. However, as for the items subject to the transition to the group tax sharing system established under the Act for Partial Amendment of the Income Tax Act, etc. (Act No. 8 of 2020), as well as to the review of the non-consolidated taxation system in association therewith, the Company and some consolidated subsidiaries in Japan have not applied the provisions of paragraph (44) of the Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28, February 16, 2018) but applied the provisions of the Income Tax Act before the amendment to the amounts of deferred tax assets and deferred tax liabilities, by virtue of paragraph (3) of the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System (ASBJ PITF No. 39, March 31, 2020). Furthermore, from the beginning of the fiscal year ending March 31, 2023, the Company plans to apply the Practical Solution on the Accounting and Disclosure Under the Group Tax Sharing System (ASBJ PITF No. 42, August 12, 2021), which establishes the handling of accounting processing and disclosures for income taxes and local corporation tax, as well as the tax effect accounting, in cases of applying the group tax sharing system. II Notes on Changes in Accounting Policies (Notes – Adoption of the Accounting Standard for Revenue Recognition and others) The Company adopted the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 March 31, 2020, hereinafter “Accounting Standard for Revenue Recognition”) and others from the beginning of the fiscal year ended March 31, 2022, so that revenue in the amount expected to be received in exchange for goods or services is recognized when control of the promised goods or services is transferred to the customer. The main changes are as follows. (1) Revenue recognition for contract construction work With regard to contract construction work agreements, previously the Company applied the construction work progress standards to construction work for which certainty of results is recognized for the progress portion, and applied the construction work completion standards to all other construction work. From the fiscal year ended March 31, 2022, this will be changed to a method in which revenue is recognized over a certain period as obligations are fulfilled. Furthermore, for construction work for which estimates of the progress rate toward fulfillment of obligations cannot reasonably be made, the cost recovery method is applied. (2) Revenue recognition for agency transactions With regard to contract construction work agreements, previously the Company applied the construction work progress standards to construction work for which certainty of results is recognized for the progress portion, and applied the construction work completion standards to all other construction work. From the fiscal year ended March 31, 2022, this will be changed to a method in which revenue is recognized over a certain period as obligations are fulfilled. 14 Furthermore, for construction work for which estimates of the progress rate toward fulfillment of obligations cannot reasonably be made, the cost recovery method is applied. For some transactions, previously the Company recognized as revenue the total amount of compensation received from the customer. From the fiscal year ended March 31, 2022, for transactions in which the Group’s role in providing goods or services to customers is that of an agent, revenue is recognized at the net amount received from customers with the amount paid to suppliers deducted. (3) Revenue recognition for senior citizen business Previously, a portion of lump-sum payments paid when moving into a fee-based nursing home was recognized as revenue at the point in time when it was confirmed that a refund would not be required. From the fiscal year ended March 31, 2022, the Company will estimate a reasonable period for fulfilling obligations and recognize revenue over a certain period based on the degree of progress. Regarding the adoption of the Accounting Standard for Revenue Recognition and others, the Company adheres to the transitional treatment established in the proviso of Paragraph 84 of the Accounting Standard for Revenue Recognition, and the amount of cumulative impact in the event that a new accounting policy is retroactively applied from the beginning of the fiscal year ended March 31, 2022, is added or deducted from retained earnings at the beginning of the fiscal year ended March 31, 2022, and the new accounting policy is applied from the beginning balance of said period. “Notes and accounts receivable–trade” shown under “Current assets” in the Consolidated Balance Sheets for the fiscal year ended March 31, 2021, are included under “Notes and accounts, receivable–trade and contract assets” from the fiscal year ended March 31, 2022. As a result, compared to prior to application of the Accounting Standard for Revenue Recognition, etc., operating revenue decreased by 4,001 million yen, operating expenses decreased by 4,089 million yen, and operating income, ordinary income, and income before income taxes each increased by 88 million yen. on the Consolidated Statements of Income for the fiscal year ended March 31, 2022. As cumulative effects of changes were reflected in net assets at the beginning of the fiscal year ended March 31, 2022, the balance at beginning of current period for retained earnings on the Consolidated Statements of Changes in Net Assets decreased by 698 million yen. (Adoption of the Accounting Standard for Fair Value Measurement and others) The Company adopted the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019, hereinafter “Accounting Standard for Fair Value Measurement”) and others from the beginning of the fiscal year ended March 31, 2022, and in adherence with the transitional treatment 15 established in Paragraph 19 of the Accounting Standard for Fair Value Measurement and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019), in the future the Company will apply the new accounting policy established in the Accounting Standard for Fair Value Measurement and others. Also, there is no impact on consolidated financial statements. III Notes on Changes in Presentation (Notes – Consolidated statements of income) (i) Assistance fund for preventing infection spread “Assistance fund for preventing infection spread” (386 million yen in the previous fiscal year), which was previously included in “Other” under non-operating income, is listed separately from the fiscal year under review due to its increased monetary significance with respect to non-operating income. (ii) Loss on investment securities Loss on investment securities (369 million yen in the previous fiscal year), which was previously listed separately under non-operating expenses, is listed as “Other” from the fiscal year under review due to its diminished monetary significance with respect to non-operating expenses. (iii) Subsidies for post-disaster reconstruction operations Subsidies for post-disaster reconstruction operations (0 million yen in the previous fiscal year), which was previously listed as “Other” under extraordinary gains, is listed separately from the fiscal year under review due to its increased monetary significance with respect to (1) Amount of deferred tax assets stated in the consolidated financial statements for the fiscal year extraordinary gains. IV Notes on Accounting Estimates 1. Recoverability of deferred tax assets under review: ¥62,996 million (i) Calculation method (ii) Key assumptions (2) Information on the nature of significant accounting estimates related to the identified items The Group recognizes deferred tax assets for tax loss carryforwards and deductible temporary differences to the extent that they are expected to reduce future tax liabilities after estimating future taxable income based on earning capability and tax planning. The Group estimates the amount of future taxable income based on earning capability and tax planning, mainly based on its business plans. 16 In particular, the Group’s business performance, including railway, real estate and hotels, are affected from the decline in transportation demand and slump in consumer spending due to the population refraining from going out and cancellation of events and other activities on account of the COVID-19 pandemic. For this reason, based on the information available at the time of creating the consolidated financial statements, and considering factors such as income trends under the circumstances, the Group assumes that the pandemic will have a continuous impact for a certain period of time based on the information currently available. (iii) Impact on the next fiscal year’s consolidated financial statements Deferred tax assets are primarily attributable to the impairment loss of the non-current assets of the Company’s railway business, the recovery of which heavily depends on future taxable income. Since there are many uncertainties regarding the impact of the COVID-19 pandemic, changes in the timing and amount of taxable income and changes to the effective tax rate due to tax reforms could have a significant impact on the consolidated financial statements for the next fiscal year and thereafter. 17 2. Impairment loss on non-current assets (1) Amount of non-current assets recorded in the consolidated financial statements for the fiscal year under review: Property, plant and equipment ¥575,308 million Intangible assets ¥5,735 million (2) Information on the nature of significant accounting estimates related to the identified items (i) Calculation method The Group assesses whether there is any indication of impairment on assets and asset groups. If there is an indication for the possibility of an impairment loss, then impairment loss will be tested based on the undiscounted future cash flows of the asset or asset group concerned. When it is judged that assets or asset groups should have impairment losses recognized, their carrying value is reduced to the recoverable amount and the amount of the reduction is recorded as an impairment loss. (ii) Key assumptions For the testing of impairment loss on non-current assets, certain assumptions are made including future cash flows, discount rates, etc. In particular, the Group’s business performance including railways, real estate and hotels are affected by the decline in transportation demand and a slump in consumer spending due to the population refraining from going out and cancellation of events and other activities on account of the COVID-19 pandemic. For this reason, based on the information available at the time of creating the consolidated financial statements, and considering factors such as income trends under the circumstances, the Group assumes that the pandemic will have a continuous impact for a certain period of time based on the information currently available. (iii) Impact on next fiscal year’s consolidated financial statements Since there are many uncertainties regarding the impact of the COVID-19 pandemic, differences between future cash flows and their estimated amounts could have a significant impact on the consolidated financial statements for the next fiscal year and thereafter. 18 3. Provision for loss on disaster the fiscal year under review: ¥2,115 million (i) Calculation method (1) Amount of provision for loss on disaster recorded in the consolidated financial statements for (2) Information on the nature of significant accounting estimates related to the identified items If the Group suffers damage due to a disaster, a provision for loss on disaster is recorded, in accordance with the extent of damage, for the expenses, etc., expected to be incurred for restoration in the next fiscal year and thereafter. (ii) Key assumptions In estimating provision for loss on disaster, the Group estimates for the recovery plans and construction, etc., in accordance with the extent of damage based on actual results for restoration of damage required in past disasters. (iii) Impact on next year’s consolidated financial statements With regard to disaster recovery work, any significant changes in the estimates for the recovery plan and construction could have a significant impact on the consolidated financial statements for the next fiscal year and thereafter. (3) Provision for loss on disaster that cannot be rationally estimated Due to heavy rain in July 2020, train services have been suspended on the Hisatsu line in Kyushu between Yatsushiro and Yoshimatsu stations (86.8 km operating distance). The majority of the line in the section was laid along the Kuma River, and the impact of the torrential rain has caused damages in over 400 places, including railroad disasters and bridges being washed away. Regarding the restoration policy for the Hisatsu line, the “Council for Studying Issues of the JR Hisatsu Line” was established in March 2022 under the auspices of the Ministry of Land, Infrastructure, Transport and Tourism and the Kumamoto Prefectural Government. Discussions at the Council began recently with the Company as a participant. Although there is a possibility the Group will incur expenses as a result of future Council studies, it is difficult to estimate the amount reasonably at this point in time. Therefore, in the fiscal year under review, the Group has not recorded possible expenses that may be incurred in provision for loss on disaster. 19 V Additional Information (Introduction of Board Benefit Trust (BBT)) As approved at the 32nd Annual General Meeting of Shareholders held on June 21, 2019, the Company introduced a new share-based remuneration plan called the “Board Benefit Trust (BBT)” (the “Plan”) for the Company’s directors (excluding outside directors and directors who are Audit and Supervisory Committee members) and its senior corporate officers (the “Directors, etc.”). (i) Overview of transactions The Plan is a share-based remuneration plan under which the Company’s shares are acquired through a trust using money contributed by the Company as the financial funds, and the Directors, etc. are provided with the Company’s shares and an amount of money equivalent to the market value of the Company’s shares (the “Company’s Shares, etc.”) through the trust in accordance with the Rules on Provision of Shares to Officers established by the Company. office, in principle. The Directors, etc. shall receive the Company’s Shares, etc. upon their retirement from (ii) Shares of the Company remaining in the Trust The shares of the Company remaining in the trust are recognized as treasury stock under equity at the book value in the trust (excluding incidental expenses). The book value of said treasury stock at the end of the fiscal year under review was 591 million yen and the number of shares was 183,700 shares. VI Notes to Consolidated Balance Sheet 1. Pledged assets and secured liabilities (1) Pledged assets Securities ¥27 million Merchandise and finished goods ¥110 million Investment securities ¥106 million Other (investments and other assets) ¥202 million Total: ¥446 million Liability. (2) Secured liabilities Notes and accounts payable–trade ¥51 million 20 A portion of the above securities, investment securities and other (investments and other assets) are deposited to the Fukuoka Legal Affairs Bureau as a warranty against defects on housing construction in accordance with the Act for Secure Execution of Defect Housing Warranty 2. Accumulated depreciation of property, plant and equipment ¥769,378 million 3. Reduction entry due to construction grants received in fixed assets (cumulative) ¥418,933 million VII Notes to Consolidated Statement of Income 1. Impairment loss The Group determines the asset groups by each business or property based on the classifications in managerial accounting. For railway business assets, the Group identifies entire railway lines as a single asset group because the railway network generates cash flows as a whole. In addition, the Group identifies idle assets that are not expected to be used in the future as separate asset groups. As a result, for discontinued businesses and assets that were determined to be disposed of or for which the recoverable amounts have declined to a lower level than originally expected, the book value under non-current assets is reduced to the recoverable amount and the amount of the reduction in the current fiscal year is recognized as “impairment loss” (3,196 million yen) under extraordinary losses. Major applications Type Place Amount Rental assets Retail stores, etc. 4 44 Land, buildings, Kyoto and fixtures etc. Prefecture, etc. Buildings and Kumamoto fixtures, etc. Prefecture, etc. Total (Millions of Yen) 2,486 709 3,196 The recoverable amounts of these asset groups are calculated based on net sale value or value in use. If the recoverable amount is calculated using value in use, the future cash flows are determined using a discount rate of 4.0%. In addition, if the recoverable amount is calculated using net sale value, the property tax-appraised value of non-current assets is determined based on reasonable adjustments, etc. 2. Disaster-damage losses and provision for loss on disaster Expenditures and estimated expenditures of the recovery expenses, etc. associated with the “Rainstorms and heavy rains in the period from August 7, 2021, to August 23, 2021” are recognized in “disaster-damage losses” and “provision for loss on disaster” respectively under extraordinary losses. 21 VIII Notes to Consolidated Statements of Changes in Net Assets 1. Class and total number of shares outstanding as of the end of the fiscal year under review Common stock 157,301,600 shares 2. Dividends (1) Dividends paid Annual General Meeting of Shareholders held on June 23, 2021 Resolution Class of shares Record date Effective date Total dividend amount (millions of yen) Dividends per share (yen) Common stock 14,629 93.0 March 31, 2021 June 24, 2021 Note: The total amount of dividends includes 17 million yen in dividends for the shares of the Company’s stock held by the trust as trust assets of the Board Benefit Trust (BBT). (2) Among the dividends whose record date falls within the fiscal year under review, those whose effective date will fall within the next fiscal year Resolution (scheduled) Class of shares Total dividend amount (millions of yen) Source of dividends Dividends per share (yen) Record date Effective date Annual General Meeting of Shareholders held on June 23, 2022 Common stock 14,629 93.0 March 31, 2022 June 24, 2022 Retained earnings Note: The total amount of dividends includes 17 million yen in dividends for the shares of the Company’s stock held by the trust as trust assets of the Board Benefit Trust (BBT). 22 IX Notes on Financial Instruments 1. Status of financial instruments and other financial institutions. The Group invests in securities, etc. and raises funds via issuance of bonds and borrowings from banks Customer credit risk associated with notes and accounts receivable–trade, and contract assets is managed under appropriate credit control policies. Investment securities are mainly stocks, and the Group checks the fair values of listed shares on a quarterly basis. Commercial papers, bonds and borrowings are used for working capital (mainly short term) and capital expenditures (long term). The Group executes derivative transactions in accordance with internal regulations and within the scope necessary for the underlying transactions, and does not engage in speculative transactions. The carrying amounts in the Consolidated Balance Sheets, fair values and unrealized gains and losses 2. Fair value of financial instruments as of March 31, 2022 are as follows. Carrying amount(*1) Fair value(*1) Unrealized gain/(loss) (1) Investment securities (2) Bonds (3) Long-term debt (4) Derivative transactions(*3) 28,684 (120,000) (162,116) (374) 28,702 (117,096) (161,471) (374) (*1) Amounts shown in parentheses are net liabilities. (*2) Regarding “Cash and time deposits,” “Notes and accounts receivable–trade and contract assets,” “Fares receivable,” “securities,” “Notes and accounts payable–trade,” “Short-term loans,” “Commercial papers,” “Payables,” “Accrued income taxes,” and “Fare deposits received with regard to railway connecting services,” as these items are settled within a short period of time and the fair values are approximately equal to the carrying amounts, the notes have been omitted. (*3) Assets and liabilities from derivative transactions are net. Amounts shown in parentheses are net liabilities. (*4) Investments in unlisted equity securities, etc. (carrying amount: 10,122 million yen) and investments in partnerships (carrying amount: 6,278 million yen) were not included in “(1) Investment securities” because they do not have market prices. 3. Matters pertaining to the breakdown of fair value of financial instruments by level and others The fair value of financial instruments is classified into the following three levels according to the observability and materiality of the inputs used to calculate fair value. (Millions of Yen) 18 2,904 645 ─ 23 Level 1 fair value: The fair value calculated based on (unadjusted) quoted prices in active markets for identical assets or liabilities Level 2 fair value: The fair value calculated using inputs other than those included within Level 1 that are either directly or indirectly observable Level 3 fair value: The fair value calculated using key unobservable inputs When multiple inputs that have a significant impact on the calculation of fair value are used, fair value is classified as the level with the lowest priority for fair value calculation among the levels to which each of the inputs is associated. 24 Balance Sheets Category Investment securities Other securities Shares Bonds Other Derivative transactions Currency related Total liabilities Balance Sheets Category Investment securities Held-to-maturity debt securities Government bonds, local government bonds, etc. Total Assets Bonds Long-term debt Total liabilities (1) Financial assets and financial liabilities for which fair value is recorded on the Consolidated (Millions of yen) Fair value Level 1 Level 2 Level 3 Total Total Assets 26,050 1,917 (2) Financial assets and financial liabilities for which fair value is not recorded on the Consolidated (Millions of yen) Fair value Level 1 Level 2 Level 3 Total – – – – – – – – – – – 25,860 2,024 82 27,967 374 374 735 735 117,096 161,471 278,567 25,860 106 82 – – 336 336 – – – 1,917 – – 374 374 398 398 117,096 161,471 278,567 25 (Note) Explanation of evaluation techniques and inputs used to calculate fair value (i) Investment securities Stocks and other similar instruments are classified as Level 1 as their fair value is the unadjusted quoted price in active markets. For debt securities, the fair value is the unadjusted quoted price in active markets, or the price quoted by the transacting financial institutions, and these are primarily classified as Level 1 for government bonds and Level 2 for all other debt securities. (ii) Bonds Regarding bonds, while fair value is the unadjusted quoted price, the frequency of market transactions is low and this cannot be considered as a quoted price in active markets, so they are classified as Level 2. (iii) Long-term debt (including current portion of long-term debt) Regarding Long-term debt, since the fair value is the present value of the total amount of principal and interest payment discounted by the interest rate expected to be applied for a similar new loan, it is classified as Level 2. (iv) Derivative transactions Derivative transactions are classified as Level 2 as their fair value is based on prices and other information provided by transacting financial institutions. X Notes on Rental Properties 1. Status of rental properties The Company and some of its subsidiaries own commercial buildings for rent. 2. Fair value of investment and rental properties Carrying amount 272,775 (Notes) (Millions of Yen) Fair value 323,937 1 The carrying amount is the acquisition cost less accumulated depreciation. 2 For the fair values at the end of the fiscal year under review, the amounts for significant properties are calculated by the Company based on Real Estate Appraisal Standards, etc., and the amounts for other properties are calculated by the Company based on certain appraisal values and indicators that are considered to appropriately reflect market prices. 3 Assets under construction or development are not included in the above table because it is extremely difficult to determine their fair values. 26 Revenue from contracts with customers Revenue from other sources Sales to external customers Revenue from contracts with customers Revenue from other sources Sales to external customers XI Notes on Revenue Recognition 1. Information breaking down revenue from contracts with customers (Millions of Yen) Reportable segment Transportation Non-Commuter Commuter Other Construction 27,908 61,461 11,421 42,191 – – 1,218 387 27,908 61,461 12,639 42,579 Reportable segment Real Estate and Hotels Real estate Real estate lease sale Hotels business business (Millions of Yen) Retail and Restaurant Other Total 23,058 43,639 8,990 43,334 30,883 292,889 31,023 – – 98 3,910 36,638 54,081 43,639 8,990 43,433 34,794 329,527 2. Information fundamental to understanding revenue from contracts with customers Information fundamental to understanding revenue is as described in “(5) Accounting standards for significant revenue and expenses” under “4. Accounting policies” in “I Notes on Important Matters for Basis of Presentation of Consolidated Financial Statements.” 27 3. Information pertaining to the relationship between fulfillment of obligations based on contracts with customers and cash flows resulting from such contracts, as well as the amounts and timing of revenue from contracts with customers that existed at the end of the fiscal year ended March 31, 2022, which is expected to be recognized in or after the fiscal year ending March 31, 2023 (1) Balance, etc. of contract assets and Contract liabilities (Millions of Yen) Balance at Balance at end of beginning of the period of the fiscal fiscal year ended year ended March March 31, 2022 31, 2022 45,003 5,854 14,355 37,017 8,518 15,929 Receivables from contracts with customers Contract assets Contract liabilities Contract assets primarily pertain to contract construction work agreements in the construction industry for which progress has been made on the contracted construction work as of the final day of the fiscal year but for which rights to claim compensation are unclaimed. Contract assets are transferred to Receivables from contracts with customers when the right to compensation becomes unconditional. Contract liabilities primarily pertain to railway fares received in advance and advances received of lump-sum payments paid when moving into a fee-based nursing home in the senior citizen business. Contract liabilities are reversed upon recognition of revenue. Of the revenue recognized in the fiscal year ended March 31, 2022, the amount included in the balance of Contract liabilities at the beginning of the period is 8,974 million yen. 28 (2) Transaction price allocated to remaining obligations The Company and consolidated subsidiaries apply a practical expedient method in noting the transaction prices allocated to remaining obligations, and contracts having an initial estimated contract period of one year or less are not included in the scope for notes. The total amount of transaction prices allocated to remaining obligations and the estimated periods for recognizing revenue are as follows. (Millions of Yen) Fiscal year ended March 31, 2022 23,093 4,614 978 2,244 30,931 1 year or less Over 3 years Total Over 1 year, but not more than 2 years Over 2 years, but not more than 3 years XII Notes on Per Share Information 1. Net assets per share ¥2,471.60 2. Net income per share ¥84.34 (Note) When calculating net assets per share, the Company’s shares remaining in the Board Benefit Trust (BBT) recognized as treasury stock under shareholders’ equity are included in the treasury stock excluded from the number of shares issued and outstanding at end of period (183,700 shares at the end of the fiscal year under review). In addition, when calculating net income per share, the shares are included in the treasury stock excluded from the average number of shares during the period (183,925 shares for the fiscal year under review). 29 Non-Consolidated Statements of Changes in Net Assets (From April 1, 2021 to March 31, 2022) Shareholders’ equity Capital surplus Retained earnings (Millions of yen) Total retained earnings Other retained earnings Reserve for tax purpose reduction entry of non-current assets Retained earnings brought forward Share capital Legal capital surplus Other capital surplus Total capital surplus 16,000 171,908 52,113 224,022 7,686 84,330 92,017 Restated balance 16,000 171,908 52,113 224,022 7,686 84,230 91,917 Balance at beginning of period Cumulative effects of changes in accounting policies Changes during current period Dividends of surplus Net income Purchase of treasury shares Disposal of treasury stock Net changes in items other than shareholders’ equity during current period Total changes during current period (100) (100) (14,629) (14,629) 8,950 8,950 – – – – – (5,678) (5,678) Balance at end of period 16,000 171,908 52,113 224,022 7,686 78,552 86,238 30 Balance at beginning of period Cumulative effects of changes in accounting policies Restated balance Changes during current period Dividends of surplus Net income Purchase of treasury shares Disposal of treasury stock Net changes in items other than shareholders’ equity during current period Total changes during current period Balance at end of period Shareholders’ equity Treasury shares Total shareholders’ equity Valuation and translation adjustments Valuation difference on available-for-sale securities Total net assets (594) (594) (0) 2 2 (591) 331,445 (100) 331,345 (14,629) 8,950 (0) 2 (5,675) 325,669 6,594 6,594 (2,270) (2,270) 4,323 338,040 (100) 337,939 (14,629) 8,950 (0) 2 (2,270) (7,946) 329,993 (Note) The above figures are rounded down to the nearest ¥1 million. 31 Notes to Non-Consolidated Financial Statements I Notes on Significant Accounting Policies 1. Basis and method of valuation of securities (1) Shares in subsidiaries or affiliates:

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