日本電気硝子（5214） – Financial Report 2021

Financial ReportFor the year ended December 31, 2021https://www.neg.co.jp/en/Consolidated Financial StatementsConsolidated Balance SheetsNippon Electric Glass Co., Ltd. and Consolidated SubsidiariesDecember 31, 2020 and 2021ASSETSCurrent assets:Cash and time deposits (Notes 7 and 10)Notes and accounts receivable – trade (Note 7)Electronically recorded monetary claims – operatingAllowance for doubtful receivablesInventories (Note 11)Other current assets (Notes 7 and 9)Total current assetsProperty, plant and equipment (Note 12):LandBuilding and structuresMachinery and equipmentConstruction in progressTotal property, plant and equipmentAccumulated depreciationNet property, plant and equipmentIntangible assets (Note 12):Intangible assetsInvestments and other assets:Investment securities (Notes 7 and 8)Investment in affiliates (Note 8)Deferred tax assets (Note 14)Other assetsTotal investments and other assetsMillions of yenThousands ofU.S. dollars (Note 1)December 31, 2020 December 31, 2021 December 31, 2021¥ 121,440 58,558 728 (164) 60,864 4,974 246,400 11,400 163,577 710,833 19,532 905,342 (549,614) 355,728 ¥ 134,975 59,580 1,034 (178) 62,100 7,001 264,512 11,582 176,477 737,932 25,260 951,251 (570,970) 380,281 $ 1,173,696 518,087 8,991 (1,548) 540,000 60,879 2,300,105 100,713 1,534,583 6,416,800 219,652 8,271,748 (4,964,957) 3,306,791 5,208 4,959 43,122 43,833 3,602 1,847 1,522 50,804 40,519 4,439 1,896 1,524 48,378 352,339 38,600 16,487 13,252 420,678 Total assets¥ 658,140 ¥ 698,130 $ 6,070,696 The accompanying notes to the consolidated financial statements are an integral part of these statements.1Nippon Electric GlassMillions of yenThousands ofU.S. dollars (Note 1)December 31, 2020 December 31, 2021 December 31, 2021current portion of long-term debt (Notes 7 and 13)¥ 49,019 ¥ 36,911 $ 320,965 LIABILITIES AND NET ASSETSCurrent liabilities:Short-term debt, including Notes and accounts payable (Note 7):TradeConstruction and otherAccrued expensesAccrued income taxes Reserve for business structure improvementReserve for loss on plant closingOther reservesOther current liabilities (Notes 7 and 9)Total current liabilitiesLong-term liabilities:Long-term debt (Notes 7 and 13)Deferred tax liabilities (Note 14)Reserve for special repairsReserve for loss on plant closingOther reservesNet liabilities for severance and retirement benefits (Note 16)Other long-term liabilities (Note 15)Total long-term liabilitiesNet assets (Note 17):Shareholders’ equity:Common stock Authorized – 240,000,000 shares Issued – 99,523,246 shares in Dec. 2020 and Dec. 2021in Dec. 2020 and Dec. 2021Capital surplusRetained earningsTreasury stock at cost2,882,008 shares in Dec. 20206,495,982 shares in Dec. 2021Total shareholders’ equity28,502 9,018 9,884 1,534 1,270 865 157 3,328 103,577 54,668 9,226 9,342 – 20 1,036 3,351 77,643 42,539 11,306 13,784 8,705 129 14 138 4,409 117,935 59,912 7,575 8,671 294 19 1,213 2,768 80,452 369,904 98,313 119,861 75,696 1,122 122 1,200 38,339 1,025,522 520,974 65,870 75,400 2,557 165 10,548 24,069 699,583 32,156 34,311 411,137 32,15634,295 429,355 279,617 298,217 3,733,522 (10,178)467,426 (20,121)475,685(174,965)4,136,391 Accumulated other comprehensive income: Valuation difference on available-for-sale securitiesDeferred gains on hedgesForeign currency translation adjustmentsTotal accumulated other comprehensive income18,776 98 (14,101) 4,773 17,105 172 2,108 19,385 148,739 1,496 18,330 168,565 Noncontrolling interests4,721 4,673 40,635 Total net assetsContingent liabilities (Note 18)Total liabilities and net assets 476,920 499,743 4,345,591 ¥ 658,140 ¥ 698,130 $ 6,070,696 2Financial Report 2021Consolidated Statements of IncomeNippon Electric Glass Co., Ltd. and Consolidated SubsidiariesYears Ended December 31, 2020 and 2021 Net salesCost of salesGross profitOperating profitSelling, general and administrative expensesOther income (expenses):Interest and dividend incomeInterest expenseDepreciation of idle property, plant and equipment Loss on disposal of fixed assetsLoss on impairment (Note 12)Reversal of reserve for special repairsGain on sales of investment securities (Note 8)Foreign exchange gainsInsurance claim incomeLoss on accidentRestructuring expenseOther, netTotal other incomeProfit before income taxesIncome taxes (Note 14):CurrentDeferredTotal income taxesProfit Profit attributable to noncontrolling interestsMillions of yenThousands ofU.S. dollars (Note 1)December 31, 2020 December 31, 2021 December 31, 2021¥ 242,886 191,430 51,456 33,795 17,661 ¥ 292,034 209,781 82,253 49,473 32,780 $ 2,539,426 1,824,183 715,243 430,200 285,043 1,813 (587) (1,228) (768) (2,419) 2,942 2,592 936 377 (1,526) (1,336) 1,440 2,236 19,897 3,937 435 4,372 15,525 272 2,011 (504) (357) (2,100) (1,132) – 1,994 9,339 1,422 (6,999) – 2,685 6,359 39,139 12,203 (1,299) 10,904 28,235 330 17,487 (4,383) (3,104) (18,261) (9,843) – 17,339 81,209 12,365 (60,861) – 23,348 55,296 340,339 106,113 (11,296) 94,817 245,522 2,870 Profit attributable to owners of the parent¥ 15,253 ¥ 27,905 $ 242,652 Amount per share of common stock:Profit attributable to owners of the parent (Note 2)Diluted profit attributable to owners of the parent (Note 2)Cash dividends applicable to the year (Note 17)YenU.S. dollars (Note 1)¥ 157.84 – 100.00 ¥ 290.98 – 110.00 $ 2.53 – 0.96 The accompanying notes to the consolidated financial statements are an integral part of these statements.Consolidated Statements of Comprehensive IncomeNippon Electric Glass Co., Ltd. and Consolidated SubsidiariesYears Ended December 31, 2020 and 2021 Millions of yenThousands ofU.S. dollars (Note 1)December 31, 2020 December 31, 2021 December 31, 2021Profit¥ 15,525 ¥ 28,235 $ 245,522 Other comprehensive income (Note 6)Valuation difference on available-for-sale securitiesDeferred gains on hedgesForeign currency translation adjustmentsShare of other comprehensive income of associates accounted for using equity methodTotal other comprehensive income (loss)(2,372) 50 (3,153) 33 (5,442) (1,671) 74 15,853 356 14,612 (14,530) 643 137,852 3,096 127,061 Comprehensive income¥ 10,083 ¥ 42,847 $ 372,583 Comprehensive income attributable to:Owners of the parentNoncontrolling interests¥ 9,811 272 ¥ 42,517 330 $ 369,713 2,870 The accompanying notes to the consolidated financial statements are an integral part of these statements.3Nippon Electric GlassConsolidated Statements of Changes in Net AssetsNippon Electric Glass Co., Ltd. and Consolidated SubsidiariesYears Ended December 31, 2020 and 2021Common stockCapital surplusRetained earningsTreasury stockDeferred gains on hedgesNon-controlling interestsTotal net assetsThousands of sharesNumber of shares of common stock issued99,523 – – – – – 99,523 – – – – – ¥ 32,156 – – – – – ¥ 32,156 – – – – – Millions of yenValuation difference on available-for-sale securities¥ 21,148 – – – – – ¥ 34,358 – – – (47) – ¥ 405,56015,253 (9,663) – – (13) ¥ (10,258) – – (1) 81 – ¥ 34,311 – – – (16) – ¥ 411,137 27,905 (9,665) – – (22) ¥ (10,178) – – (10,002) 59 – ¥ 18,776 – – – – – Foreign currency translation adjustments¥ (10,981) – – – – – ¥ (14,101) – – – – – ¥ 48 – – – – – ¥ 98 – – – – – ¥ 5,124 – – – – – ¥ 4,721 – – – – – ¥ 477,155 15,253 (9,663) (1) 34 (13) ¥ 476,920 27,905 (9,665) (10,002) 43 (22) – – – – – (2,372) 50 (3,120) (403) (5,845) – – – – – (1,671) 74 16,209 (48) 14,564 Balance at January 1, 2020Profit attributable to owners of the parentCash dividends paidAcquisition of treasury stockDisposition of treasury stockOtherNet changes in items other than shareholders’ equityBalance at January 1, 2021Profit attributable to owners of the parentCash dividends paidAcquisition of treasury stockDisposition of treasury stockOtherNet changes in items other than shareholders’ equityBalance at December 31, 202199,523 ¥ 32,156 ¥ 34,295 ¥ 429,355 ¥ (20,121) ¥ 17,105 ¥ 172 ¥ 2,108 ¥ 4,673 ¥ 499,743 Balance at January 1, 2021Profit attributable to owners of the parentCash dividends paidAcquisition of treasury stockDisposition of treasury stockOtherNet changes in items other than shareholders’ equityThousands of U.S. dollars (Note 1)Common stockCapital surplusRetained earningsTreasury stock$ 279,617 – – – – – $ 298,356 $ 3,575,104 242,652 (84,043) – – (191) – – – (139) – $ (88,504) – – (86,974) 513 – Valuation difference on available-for-sale securities$ 163,269 – – – – – Deferred gains on hedges$ 853 – – – – – Foreign currency translation adjustments$ (122,618) – – – – – Non-controlling interestsTotal net assets$ 41,052 – – – – – $ 4,147,129 242,652 (84,043) (86,974) 374 (191) – – – – (14,530) 643 140,948 (417) 126,644 Balance at December 31, 2021$ 279,617 $ 298,217 $ 3,733,522 $ (174,965) $ 148,739 $ 1,496 $ 18,330 $ 40,635 $ 4,345,591 The accompanying notes to the consolidated financial statements are an integral part of these statements.4Financial Report 2021Consolidated Statements of Cash FlowsNippon Electric Glass Co., Ltd. and Consolidated SubsidiariesYears Ended December 31, 2020 and 2021 Cash flows from operating activities:Profit before income taxesDepreciation and amortizationLoss on impairmentInsurance claim incomeGain on sales of investment securitiesDecrease in reserve for special repairsInterest and dividend incomeInterest expenseForeign exchange gainsDecrease (increase) in notes and accounts receivable, tradeDecrease in inventoriesIncrease (decrease) in notes and accounts payable, tradeOther, netSubtotal Interest and dividends receivedInterest paidProceeds from insurance claim incomeIncome taxes paidNet cash provided by operating activitiesCash flows from investing activities:Proceeds from sales of marketable and investment securitiesPurchases of property, plant and equipment Other, netNet cash used in investing activitiesCash flows from financing activities:Increase (decrease) in short-term debt, netProceeds from long-term borrowingsRepayment of long-term borrowingsProceeds from issuance of unsecured bondsRedemption of unsecured bondsPurchase of treasury sharesCash dividends paidCash dividends paid to noncontrolling interestsOther, netNet cash used in financing activitiesMillions of yenThousands ofU.S. dollars (Note 1)December 31, 2020 December 31, 2021 December 31, 2021¥ 19,897 24,932 2,419 (377) (2,592) (2,525) (1,813) 587 (769) (5,442) 20,208 (7,391) 1,883 49,017 1,827 (631) 377 (2,728) 47,862 4,434 (25,171) 977 (19,760) 116 16,233 (3,048) – (10,000) – (9,660) (674) (706) (7,739) ¥ 39,139 26,721 1,132 (1,422) (1,994) (671) (2,011) 504 (7,581) 4,731 1,324 13,334 (1,089) 72,117 1,926 (515) 1,422 (5,068) 69,882 2,878 (35,058) 425 (31,755) (1,531) 9,831 (26,370) 10,000 – (10,001) (9,663) (353) (1,091) (29,178) $ 340,339 232,357 9,843 (12,365) (17,339) (5,835) (17,487) 4,383 (65,922) 41,139 11,513 115,948 (9,470) 627,104 16,748 (4,478) 12,365 (44,070) 607,669 25,026 (304,852) 3,696 (276,130) (13,313) 85,487 (229,304) 86,957 – (86,965) (84,026) (3,070) (9,487) (253,721) Effect of exchange rate changes on cash and cash equivalents(125) 4,559 39,643 Net increase in cash and cash equivalentsCash and cash equivalents at beginning of yearCash and cash equivalents at end of year (Note 10)20,238 100,977 ¥ 121,215 13,508 121,215 ¥ 134,723 117,461 1,054,043 $ 1,171,504 The accompanying notes to the consolidated financial statements are an integral part of these statements.5Nippon Electric GlassNotes to Consolidated Financial StatementsNippon Electric Glass Co., Ltd. and Consolidated Subsidiaries1. Basis of presenting consolidated financial statements(c) Cash and cash equivalentsThe accompanying consolidated financial statements of Nippon Electric Glass Co., Ltd. (“the Company”) and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards (“IFRS”).The accompanying consolidated financial statements have been restructured and translated into English with certain expanded disclosures from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Japanese Financial Instruments and Exchange Law. Certain supplementary information included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements.The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of the readers outside Japan, using the prevailing exchange rate at December 31, 2021, which was ¥115 to U.S. $1.00. The translations, provided for convenience, should not be construed as representations that the Japanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or any other rate of exchange.2. Significant accounting policies(a) Consolidation policiesUnder Japanese GAAP, companies are required to consolidate all significant equity investments over which they have the power of control through a majority of voting rights or the existence of certain other conditions evidencing control.The accompanying consolidated financial statements include the accounts of the Company and substantially all of its subsidiaries. All significant intercompany transactions and account balances are eliminated upon consolidation.are accounted for by the equity method or by cost. If the equity method of accounting had been applied to the investments in the companies accounted for by cost, the effect on the accompanying consolidated financial statements would not have been material.(b) Translation of foreign currenciesAll short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the relevant exchange rates at the balance sheet date.The financial statements of the Company’s overseas consolidated subsidiaries are translated into Japanese yen at the current rates for assets and liabilities and at historical rates for shareholders’ equity accounts. Average yearly rates are used for the translation of income and expense amounts. Foreign currency translation adjustments are recorded in net assets.In preparing the consolidated statements of cash flows, cash on hand, deposits placed with banks on demand and short-term highly liquid investments with maturities of three months or less when deposited or purchased are considered to be cash and cash equivalents.(d) Marketable and investment securitiesAvailable-for-sale securities with observable fair market values are stated at fair market value. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate component of net assets. Realized gains and losses on the sale of such securities are calculated using moving average cost.(e) Allowance for doubtful receivablesAllowance for doubtful receivables is provided in an amount sufficient to cover possible losses on collection. For regular receivables, it consists of an estimated amount based on the historical ratio of bad debt losses. For receivables from customers in financial difficulty, it consists of the estimated uncollectable amounts of specific doubtful receivables.(f) InventoriesInventories are stated principally at the lower of cost or net realizable value, with cost determined by the moving average method.(g) Property, plant and equipment (except for leased property)Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its domestic consolidated subsidiaries is calculated by the declining balance method at rates based on the estimated useful life of the assets. Buildings, excluding facilities attached to buildings, acquired after March 31, 1998, are depreciated using the straight-line method. Facilities attached to buildings and structures acquired after March 31, 2016 are also depreciated using the straight-line method. Depreciation of property, plant and equipment of overseas consolidated subsidiaries is calculated principally by the straight-line method based on the estimated useful life of the assets. The estimated useful life of machinery and equipment is generally from 6 to 9 years.Intangible assets are amortized by the straight-line method.(i) Severance and retirement benefitsThe Company and its consolidated subsidiaries, excluding certain consolidated subsidiaries, principally use a simplified method for calculating projected benefit obligation, which provides for accrued retirement benefits for voluntary retirement at the end of the fiscal year because few employees have applied for the defined benefit pension plans. In certain consolidated subsidiaries, the allowance for employees’ severance and retirement benefits is recognized in an amount after deducting plan assets from retirement benefits for the net defined benefit liability. Calculation methods for net defined benefit liability and retirement benefit costs are as follows:Investments in unconsolidated subsidiaries and affiliates (h) Intangible assets (except for leased property)6Financial Report 2021(1) Allocation of projected retirement benefit obligationIn calculating the retirement benefit obligation, the benefit formula method is used to allocate the projected retirement benefit obligation to the estimated years of service of the eligible employees.(2) Method for amortizing actuarial gain or lossDepending on each company’s situation, actuarial gain or loss is amortized at the time of occurrence.(j) Reserve for special repairs To prepare for the significant recurring repairs required of glass-melting furnaces, estimated costs for the next repairs are accrued within the period between the previous repair and the next envisioned repair. (k) Reserve for loss on plant closingTo provide for loss on plant closing, the Company recorded the estimated cost of closing the plant.(l) Reserve for business structure improvementTo provide for the expected loss associated with future reductions of the consolidated subsidiaries’ workforce as part of business restructuring, the Company recorded the estimated cost of completing the business restructuring.(m) Income taxesThe tax effects of loss carryforwards and temporary differences between the financial statement basis and the tax basis of assets and liabilities are recognized as deferred tax assets and liabilities. The provision for income taxes is computed based on the pretax income included in the consolidated statements of operations.(n) Research and developmentCosts related to research and development activities are charged to income as incurred and amounted to ¥6,259 million and ¥6,599 million ($57,383 thousand) for the fiscal years ended December 31, 2020 and 2021, respectively.(o) Profit attributable to owners of the parent per shareThe computations of profit attributable to the owners of the parent per share are based on the average number of shares of common stock outstanding during each year. Diluted profit attributable to the owners of the parent per share of common stock is computed based on the average number of shares outstanding increased by the number of shares that would be outstanding assuming all dilutive convertible bonds were converted at the beginning of the year at the current conversion price. Diluted profit attributable to the owners of the parent per share has not been presented for the years ended December 31, 2020 and 2021 because there were no potentially dilutive shares of common stock.(p) Derivatives and hedge accountingThe Company and its consolidated subsidiaries state derivative financial instruments at fair value and recognize changes in the fair value as gain or loss, unless the derivative financial instruments are used for hedging purposes.Forward foreign exchange contracts and interest rate swap contracts that meet the criteria for hedge accounting as provided in the “Accounting Standard for Financial Instruments” are accounted for using deferral hedge accounting, which requires unrealized gain or loss to be deferred as net unrealized gain or loss on the contract as a component of net assets until the loss or gain related to the hedged item is actually recognized.The Company and its consolidated subsidiaries enter into forward foreign exchange contracts and interest rate swap contracts to hedge the risk of exchange rate fluctuations in forecasted foreign currency transactions and fluctuations in interest rates on borrowings, respectively. For forecasted foreign currency transactions, the suitability for hedging is confirmed by pre-testing and post-testing with consideration for whether the execution of the transaction is highly likely. The Company and its consolidated subsidiaries use derivative transactions solely for the purpose of managing risks and not for speculation. The counterparties to the derivative transactions are major financial institutions. Therefore, the Company and its consolidated subsidiaries consider the credit risk to be minimal. The derivative transactions are entered into by each company in accordance with accounting policies and decisions made by each company’s management.(q) ReclassificationCertain prior period amounts have been reclassified to conform to the current year presentation. These reclassifications had no significant impact on the previously reported results of operations or retained earnings.3. Significant accounting estimatesConsideration of impairment on fixed assets(1) Amount recorded on the consolidated financial statements for the current consolidated fiscal yearThe Company and its consolidated subsidiaries own the property, plant and equipment of ¥380,281 million ($3,306,791 thousand) and intangible assets of ¥4,959 million ($43,122 thousand) at the end of the current fiscal year, ¥5,612 million ($48,800 thousand) of which was related to a certain plant owned by Electric Glass Fiber America, LLC (“EGFA”), a consolidated subsidiary. In addition, an impairment loss of ¥1,132 million ($9,843 thousand) related to the fixed assets was reported in the consolidated statements of income for the current fiscal year.(2) Other information for assisting users of consolidated financial statements in understanding the content of significant accounting estimatesEGFA prepares its financial statements in accordance with U.S. generally accepted accounting principles and groups assets on a plant basis. If an impairment indicator is identified and undiscounted future cash flows that are expected to be generated from an asset group are less than the carrying amount in the recoverability test, the difference between the carrying amount and the fair value is recognized as an impairment loss.Since early 2020, EGFA was suffering deteriorated revenues as a result of decreased sales and low productivity due to production adjustments made in response to the deteriorated market caused by the spread of COVID-19. The market did recover afterwards, and EGFA strove to improve revenues as production was increased at facilities 7Nippon Electric Glassin line with the market’s recovery. Despite its effort, EGFA incurred an operating loss due to delays in recovery of production capacity resulting from a shortage of workers, as well as soaring logistics costs resulting from global supply chain disruption, and an impairment indicator was identified. Accordingly, a recoverability test was performed for its fixed assets. As a result of the test, it was determined that the carrying amount of a certain plant was unrecoverable, and the difference between the carrying amount and the fair value was recognized as an impairment loss.The undiscounted future cash flows used for the recoverability test were derived from the business plan prepared by EGFA’s management, and the estimates used in the business plan involved management’s judgment. In estimating the fair value, the selection of a valuation approach, the measurement of replacement cost and the consideration of depreciation factors required a high degree of expertise in valuation.If delays in recovery of production capacity resulting from a shortage of workers and soaring logistics costs caused by global supply chain disruption continue in the next fiscal year, it may be necessary to revise the valuation of EGFA’s fixed assets.4. Changes in presentation methodAdoption of “Accounting Standard for Disclosure of Accounting Estimates”The Company and its consolidated subsidiaries adopted ASBJ Statement No. 31, “Accounting Standard for Disclosure of Accounting Estimates” (March 31, 2020), commencing with the consolidated financial statements for the current consolidated fiscal year. Therefore significant accounting estimates are disclosed in the note to the consolidated financial statements. The note does not include information for the previous consolidated fiscal year in accordance with the transitional provision set out in paragraph 11 of the Accounting Standard.5. Additional informationImpact of COVID-19The COVID-19 pandemic is still ongoing, and its spread continues to be a concern. For the next fiscal year and subsequent years, the Company has developed estimates based on the assumption that COVID-19 will not significantly impact the businesses of the Company and its consolidated subsidiaries.6. Accounting standards for presentation of comprehensive incomeThe components of other comprehensive income for the fiscal years ended December 31, 2020 and 2021 were as follows:Valuation difference on available-for-sale securitiesDecrease during the yearReclassification adjustments Subtotal, before taxTax benefitSubtotal, net of taxDeferred gains on hedgesIncrease during the yearReclassification adjustments Subtotal, before taxTax (expense) benefitSubtotal, net of taxForeign currency translation adjustmentsIncrease (decrease) during the yearShare of other comprehensive income of entities accounted for using equity methodIncrease during the year Millions of yen2020/122021/12Thousands of U.S. dollars2021/12¥ (769) (2,487) (3,256) 884 (2,372) 164 (156) 8 42 50 ¥ (436) (1,994) (2,430) 759 (1,671) 258 (146) 112 (38) 74 $ (3,791) (17,339)(21,130) 6,600(14,530) 2,243(1,270)973(330)643(3,153) 15,853 137,85233 356 3,096Total other comprehensive income (loss)¥ (5,442) ¥ 14,612$ 127,0618Financial Report 20217. Financial instruments(a) Status of financial instruments(1) Policy on financial instrumentsAs a Group policy, the Company and its consolidated subsidiaries (“the Group”) restrict investments of surplus cash, if any, to safe financial assets such as bank deposits. Funds required by the Company are obtained mainly through bank borrowings and the issuance of bonds. Derivatives are used to avoid the risks described below and are not entered into for speculative purposes.(2) Details of financial instruments, associated risks and risk management structureNotes and accounts receivable – trade, which are operating receivables, are exposed to customer credit risk. The Company, pursuant to the Company’s Credit Control Regulations, manages credit risk by managing the due dates and outstanding balances of each counterparty and by monitoring the credit status of major counterparties. Consolidated subsidiaries perform similar procedures in conformity with the Company’s Credit Control Regulations.Operating receivables denominated in foreign currencies, which arise from the Company’s global business development, are exposed to foreign exchange fluctuation risk. The Group enters into forward foreign exchange contracts mainly for accounts receivable associated with export transactions of finished goods to manage fluctuations in future foreign exchange rates.Investment securities consist mainly of equity securities of companies with which companies in the Group have business relationships and are exposed to market price fluctuation risk. The Company, pursuant to the Company’s Shareholdings Regulations, monitors the fair values of such securities and regularly reviews its holdings.Notes and accounts payable – trade, which are operating debt, are settled within one year.Regarding borrowings, short-term debt is issued mainly to obtain funds for operating transactions, and bonds and long-term debt are issued mainly for capital expenditures. Some borrowings have floating interest rates and are exposed to interest rate fluctuation risk against which long-term debt is partially hedged through interest rate swap contracts.For details regarding hedge accounting of derivatives, such as hedging instruments and hedged items, and hedging policy, refer to Note 2 (p), “Significant accounting policies – Derivatives and hedge accounting.”Matters regarding derivative transactions are determined by executives in charge of accounting at each consolidated Group company in accordance with the regulations of each company. Approval for transactions that exceed a certain scope is granted by the Company’s management committee. Operations and management pertaining to the execution of derivative transactions are carried out by each company’s accounting department, and such operations are managed through a check and balance system. With derivative transactions, the Company enters into contracts only with financial institutions with high ratings to reduce credit risk.Operating debt and borrowings are exposed to liquidity risks. The Group manages such risks by cash management forecasting at each Group company.(3) Supplementary explanation for fair values of financial instrumentsThe notional amounts of derivatives in Note 9, “Derivatives,” do not indicate the market risks pertaining to the derivatives themselves. 9Nippon Electric Glass(b) Fair values of financial instrumentsThe tables below show the book values of financial instruments recorded in the consolidated balance sheet, their fair values and any differences between the book values and fair values as of December 31, 2020 and 2021. Financial instruments whose fair values were deemed to be extremely difficult to estimate were not included. (See in the notes to the tables below – Note 3, “Financial instruments whose fair values are deemed to be extremely difficult to estimate.”) Derivatives accounted for with hedge accounting2822020/12(1) Cash and time deposits(2) Notes and accounts receivable – trade(3) Investment securities:Other securities(4) Short-term debt:Short-term debtCurrent portion of long-term debt(5) Notes and accounts payable – trade(6) Long-term debt:Unsecured bondsLong-term borrowings(7) Derivatives2021/12(1) Cash and time deposits(2) Notes and accounts receivable – trade(3) Investment securities:Other securities(4) Short-term debt:Short-term debtCurrent portion of long-term debtCurrent portion of unsecured bonds(5) Notes and accounts payable – trade(6) Long-term debt:Unsecured bondsLong-term borrowings(7) Derivatives2021/12(1) Cash and time deposits(2) Notes and accounts receivable – trade(3) Investment securities:Other securities(4) Short-term debt:Short-term debtCurrent portion of long-term debtCurrent portion of unsecured bonds(5) Notes and accounts payable – trade(6) Long-term debt:Unsecured bondsLong-term borrowings(7) DerivativesBook value¥ 121,44058,558 Millions of yenFair value¥ 121,44058,558 43,831 43,831 Difference¥ – -(22,712)(26,307)(28,502) (20,000)(34,668)(21,725)(5,186)(10,000)(42,539) (20,000)(39,912)(22,712)(26,350)(28,502)(20,033)(34,983)282(21,725)(5,254)(10,043)(42,539)(20,062)(40,111)Book value¥ 134,97559,580 Millions of yenFair value¥ 134,97559,58040,517 40,517Difference¥ – – – -(43) -(33)(315) – – -(68)(43) -(62)(199) -Thousands of U.S. dollarsBook value$ 1,173,696 518,087 Fair value$ 1,173,696 518,087 352,322 352,322 (188,913)(45,095)(86,957) (369,904)(173,913)(347,061)(188,913)(45,687)(87,330)(369,904)(174,452)(348,791)Difference$ – – – – (592)(373) – (539)(1,730) – Derivatives accounted for with hedge accounting294 294 Derivatives accounted for with hedge accounting2,557 2,557 10Financial Report 2021Notes: Fair value measurements of financial instruments and matters regarding marketable securities and derivatives 1. Amounts for “Book value” and “Fair value” in parentheses indicate net liabilities. 2. Measurements of fair value for financial instruments and matters regarding marketable securities and derivatives (1) Cash and time deposits and (2) Notes and accounts receivable – tradeThe fair value of these items approximates the book value because of their short-term nature. Thus, the book value is used as the fair value.(3) Investment securitiesThe fair value of equity securities is based on market prices on public exchanges. For information on investment securities, refer to Note 8, (6) Long-term debtThe fair value of unsecured bonds issued by the Company is based on the market price if available. If market price is not available, the fair value is based on the present value calculated by discounting the total amount of principle and interest outstanding at an appropriate rate considering the time to maturity and the credit risk.The fair value of long-term borrowings is measured by discounting the total amount of principle and interest outstanding at an estimated interest rate for similar new borrowings.(7) DerivativesRefer to Note 9, “Derivatives.”extremely difficult to estimate“Marketable and investment securities.”3. Financial instruments whose fair values are deemed to be (4) Short-term debt and (5) Notes and accounts payable – tradeThe fair value of these items, excluding the current portion of long-term debt and unsecured bonds, approximates the book value because of their short-term nature. Thus, the book value is used as the fair value. The current portion of long-term debt and unsecured bonds, which are included in short-term debt, is measured by the methods used in Subsection (6) below, “Long-term debt” and classified as such.Equity securities issued by affiliates, investments in capital of subsidiaries and associates and nonlisted equity securities are not included in Subsection (3) above, “Investment securities” because their fair values were deemed extremely difficult to estimate, they had no quoted market prices and it was not possible to estimate their future cash flows. For information related to these securities, refer to Note 8, “Marketable and investment securities.”8. Marketable and investment securities(a) Acquisition cost and book value of securities with observable market values at December 31, 2020 and 2021 were as follows:2020/12Available-for-sale securities: Securities with book value exceeding acquisition cost:Securities with book value not exceeding acquisition cost:Equity securitiesEquity securities2021/12Available-for-sale securities: Securities with book value exceeding acquisition cost:Securities with book value not exceeding acquisition cost:Equity securitiesEquity securities2021/12Available-for-sale securities: Securities with book value exceeding acquisition cost:Securities with book value not exceeding acquisition cost:Equity securitiesEquity securitiesAcquisition costDifferenceMillions of yenBook value¥ 17,661¥ 43,198¥ 25,537682 ¥ 18,343633¥ 43,831(49) ¥ 25,488Acquisition costDifferenceMillions of yenBook value¥ 15,976 ¥ 39,087¥ 23,1111,483 ¥ 17,459 1,430¥ 40,517 (53) ¥ 23,058 Acquisition costThousands of U.S. dollarsBook valueDifference$ 138,922 $ 339,887$ 200,96512,896 $ 151,81812,435 $ 352,322 (461) $ 200,504 11Nippon Electric Glass (b) Book values of securities with no available market values at December 31, 2020 and 2021 were as follows:Available-for-sale securities: Equity securities issued by affiliatesInvestments in capital of subsidiaries and associatesNonlisted equity securities, otherMillions of yen2020/122021/12Thousands of U.S. dollars2021/12¥ 1,684 1,918 2 ¥ 3,604¥ 1,684 2,755 2 ¥ 4,441 $ 14,643 23,957 17 $ 38,617 (c) Sales of available-for-sale securities sold in the years ended December 31, 2020 and 2021 were as follows:Total sales amountsGains on sales2020/12¥ 4,434 2,592 Millions of yen2021/12¥ 2,878 1,994 Thousands of U.S. dollars2021/12$ 25,026 17,339 (d) Impairment loss on investment securitiesThe Company recognized impairment loss of ¥106 million on investment securities for the fiscal year ended December 31, 2020. There was no impairment loss on investment securities in the year ended December 31, 2021.If the fair market value as of the end of each financial quarter has declined by more than 30% from the acquisition cost, impairment loss on investment securities is recognized.12Financial Report 20219. DerivativesThe fair values of derivative contracts used by the Company and its consolidated subsidiaries at December 31, 2020 and 2021 were as follows:Derivative transactions to which hedge accounting has been applied(a) Currency related transactionsHedged itemsNotional amountPortion due after 1 yearFair valueMillions of yen2020/12Method of hedge accountingType of transactionForward foreign exchangeDeferral hedge accounting2021/12Method of hedge accountingDeferral hedge accountingType of transactionForward foreign exchange2021/12Method of hedge accountingDeferral hedge accountingType of transactionForward foreign exchangeSellBuyForecasted transactions for accounts receivable denominated in foreign currencies Forecasted transactions for accounts payable denominated in foreign currencies ¥ 35,154¥ 6,174¥ 294 129¥ 35,283- ¥ 6,174(1) ¥ 293 Hedged itemsNotional amountPortion due after 1 yearFair valueMillions of yenSellForecasted transactions for accounts receivable denominated in foreign currencies ¥ 45,924 ¥ 45,924 ¥ 9,512 ¥ 9,512 ¥ 294 ¥ 294 Hedged itemsNotional amountPortion due after 1 yearFair valueThousands of U.S. dollarsSellForecasted transactions for accounts receivable denominated in foreign currencies $ 399,339$ 399,339$ 82,713$ 82,713$ 2,557$ 2,557 Note: Fair value is based on prices obtained from financial institutions.(b) Interest related transactions2020/12Method of hedge accountingDeferral hedge accountingNote: Fair value is based on prices obtained from financial institutions.Type of transactionInterest rate swapHedged itemsInterest on borrowingsNotional amount¥ 10,000 Portion due after 1 year¥ -Fair value¥ (11)Millions of yenThere were no interest related transactions for the year ended December 31, 2021.13Nippon Electric Glass10. Cash and cash equivalentsCash and cash equivalents at December 31, 2020 and 2021 were as follows:Cash and time deposits on consolidated balance sheetsTime deposits due over three monthsCash and cash equivalents in consolidated statements of cash flows¥ 121,215¥ 134,723 $ 1,171,504 Millions of yen2020/12¥ 121,440(225)2021/12¥ 134,975 (252)Thousands of U.S. dollars2021/12$ 1,173,696 (2,192)11. InventoriesInventories at December 31, 2020 and 2021 consisted of the following: 2020/12¥ 35,3182,35923,187¥ 60,864Millions of yen2021/12¥ 32,045 1,341 28,714 ¥ 62,100 Thousands of U.S. dollars2021/12$ 278,652 11,661 249,687 $ 540,000 Finished and purchased goodsWork-in-processRaw materials and others12. Loss on impairment(a) Grouping(b) Details of loss on impairment by fiscal year(1) Fiscal year ended December 31, 2020The Company and its consolidated subsidiaries group operating assets by business unit for which the profit or loss is continually controlled to measure any impairment of the assets. Important idle assets which are not used for business are grouped by project.UseLocationTypeBusiness assets for glass tubing for pharmaceutical and medical use, glass tubing for lighting and heat resistant glassOtsu plant, Shiga-Takatsuki plant, otherBusiness assets for glass fiberElectric Glass Fiber America, LLCSignificant idle assetsElectric Glass Fiber America, LLC, Shiga-Takatsuki plant, OLED Material Solutions Co., Ltd.TotalMachinery and equipmentOthersSubtotalTrademarksSubtotalMachinery and equipmentBuilding and structuresOthersSubtotalLoss on impairmentMillions of yen2020/12¥ 472 69 541 267 267 1,312 295 4 1,611 ¥ 2,419 14Financial Report 2021i. Business assets for glass tubing for pharmaceutical and medical use, glass tubing for lighting and heat resistant glass1. Reason to recognize impairmentFor the manufacturing of glass tubing for pharmaceutical and medical use, glass tubing for lighting and heat resistant glass, the improvements in production efficiency could not sufficiently offset the reduction in sales of some products. Therefore, the book values of the production facilities of these products were written down to their recoverable values.2. Assessment of recoverable valuesThe recoverable values of business assets for glass tubing for pharmaceutical and medical use, glass tubing for lighting and heat resistant glass were based on the value in use. The value in use was calculated by discounting the future cash flows to be derived from the assets to the present value. ii. Business assets for glass fiber1. Reason to recognize impairmentThe impairment tests performed based on the accounting principles generally accepted in the U.S. revealed that the fair values of the trademarks of Electric Glass Fiber America, LLC, the Company’s subsidiary, were below their book values. As a result, the book values were written down to the fair values.2. Assessment of recoverable valuesThe recoverable values of business assets for the glass fiber business were based on the fair value.In Sections i and ii above, the discount rates used for calculating the value in use and the fair value were 8.2% (before tax) and 8.0% (after tax).iii. Significant idle assets1. Reason to recognize impairment2. Assessment of recoverable valuesSince there was no plan to use certain idle assets, the book values of the assets were written down to the recoverable values.The recoverable values of significant idle assets were based on net selling price. No recoverable values were expected for part of the production facilities of the glass manufacturing line due to the low probability of future diversion and sales. Net selling price was measured reasonably by market value.(2) Fiscal year ended December 31, 2021UseLocationTypeBusiness assets for glass fiberElectric Glass Fiber America, LLCTotali. Business assets for glass fiber1. Reason to recognize impairmentMachinery and equipmentBuilding and structuresLandOthersSubtotalLoss on impairmentMillions of yenThousands of U.S. dollars2021/12¥ 629457 43 3 1,132 ¥ 1,1322021/12$ 5,4703,974 374 259,843 $ 9,843As explained in Note 3, “Significant accounting estimates,” EGFA, the Company’s consolidated subsidiary in the U.S. operating a glass fiber business, incurred an operating loss related to decreased profitability due to delays in recovery of production capacity resulting from a shortage of workers, and soaring logistics costs caused by global supply chain disruption. Accordingly, a recoverability test based on U.S. generally accepted accounting standards was performed for its fixed assets. As a result of the test, it was determined that the fair value of certain fixed assets was below the carrying value and the difference between the carrying amount and fair value was recognized as impairment loss.2. Assessment of recoverable valuesThe fair values of certain business assets used in the glass fiber business were based on the replacement cost with consideration for depreciation factors.15Nippon Electric Glass13. Short-term and long-term debtShort-term debt, including the current portion of long-term debt, at December 31, 2020 and 2021 consisted of the following:Short-term bank borrowings, average interest rate 0.2% per annumannumCommercial paper, average interest rate -0.1% per Current portion of long-term borrowings, average interest rate 1.1% per annumCurrent portion of unsecured bonds, average interest rate 0.6% per annumAverage interest rate is the weighted average interest rate for amounts outstanding as of the fiscal year end.Long-term debt at December 31, 2020 and 2021 consisted of the following:Millions of yen2020/122021/12Thousands of U.S. dollars2021/12¥ 20,712¥ 19,725$ 171,522 2,00026,307-¥ 49,0192,000 5,18617,391 45,09510,000¥ 36,91186,957$ 320,965 Borrowings, principally from banks and insurance companies due from 2022 through 2027, average interest rate 0.6% per annum0.6% unsecured bonds, due in 20220.3% unsecured bonds, due in 20260.3% unsecured bonds, due in 2028Less current portion of long-term borrowingsLess current portion of unsecured bondsThe aggregate annual maturities of long-term debt at December 31, 2021 were as follows:Millions of yen2020/122021/12Thousands of U.S. dollars2021/12¥ 45,09810,00010,00010,00075,098 (5,186) (10,000) ¥ 59,912$ 392,156 86,957 86,957 86,956 653,026 (45,095) (86,957) $ 520,974 ¥ 60,97510,00010,000-80,975 (26,307) – ¥ 54,668Millions of yen¥ 15,186 15,861 4,630 19,401 10,010 10,010 Thousands of U.S. dollars$ 132,052 137,922 40,261 168,705 87,043 87,043 ¥ 75,098 $ 653,026 Years ending December 31202220232024202520262027 and thereafterFor flexible financing purposes, the Company has committed credit facilities with certain banks. The maximum aggregate credit facility available to the Company was ¥25,000 million ($217,391 thousand) as of December 31, 2021. The credit facility had not been used as of December 31, 2021.16Financial Report 202114. Income taxesThe Company is subject to a number of taxes based on income, which, in the aggregate, indicate a statutory tax rate in Japan of approximately 30.5% for each of the fiscal years ended December 31, 2020 and 2021.The significant differences between the statutory tax rate in Japan and the effective tax rate of the Company and its consolidated subsidiaries for financial statement purposes for the fiscal years ended December 31, 2020 and 2021 were as follows:Statutory tax rate in JapanDividend income, other nontaxable income and expensesDifference in tax rates for overseas consolidated subsidiariesUndistributed profit of overseas consolidated subsidiariesEffect of elimination of dividend incomeAdjustments based on mutual agreementsOverseas withholding taxEffect of elimination of unrealized gainsMovement of valuation allowanceTax credits for experimentation and research expensesOthersEffective tax rate2020/1230.5%(9.3)(2.8)2.6 7.0 (4.4)1.6 0.5 (2.9)(0.7)(0.1)22.0%2021/1230.5% (3.8) (2.8) 2.6 3.7 – (1.2)2.0 (1.4) (0.7) (1.0) 27.9%Significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities as of December 31, 2020 and 2021 were as follows: Deferred tax assets:Millions of yen2020/122021/12Thousands of U.S. dollars2021/12Tax losses carried forwardDepreciation in excess of tax limitCapital allowancesGoodwillUnrealized gain on property, plant and equipmentReserve for special repairsLoss on devaluation of inventoriesLoss on valuation of investment securitiesUnrealized gain on inventoriesAccrued bonusesOthersSubtotal deferred tax assetsValuation allowance for tax losses carried forwardValuation allowance for deductible temporary differencesTotal valuation allowanceTotal deferred tax assets Deferred tax liabilities:Depreciation of overseas consolidated subsidiaries Valuation difference on available-for-sale securitiesUndistributed profit of overseas consolidated subsidiariesOthersTotal deferred tax liabilities¥ 7,7864,894 2,522 3,622 2,181 2,849 2,310 1,118 567 358 3,411 31,618 (6,958) (14,825) (21,783) 9,835 (6,879) (6,712) (3,108) (515) (17,214) ¥ 8,9735,494 3,773 3,669 3,357 2,645 2,384 1,118 990 470 4,461 37,334 (8,375) (13,802) (22,177) 15,157 (9,629) (5,953) (4,135) (1,119) (20,836) $ 78,026 47,774 32,809 31,904 29,191 23,000 20,730 9,722 8,609 4,087 38,791 324,643 (72,826) (120,017) (192,843) 131,800 (83,730) (51,765) (35,957) (9,731) (181,183) Net deferred tax liabilities ¥ (7,379) ¥ (5,679) $ (49,383) 17Nippon Electric GlassNotes: Tax losses carried forward and their deferred tax assets by expiration period as of December 31, 2020 and 2021 were as follows:2020/12202120222023202420252026 and thereafterTotal2021/12202220232024202520262027 and thereafterTotal202220232024202520262027 and thereafterTotalTax losses carried forwardDeferred tax assetsTax losses carried forwardDeferred tax assetsMillions of yenValuation allowance for tax losses carried forward¥ (113)–(273)(385)(6,187)¥ (6,958)Millions of yenValuation allowance for tax losses carried forward¥ –(324) (33) (167) (7,851) ¥ (8,375) Thousands of U.S. dollarsValuation allowance for tax losses carried forward$ –(2,817) (287) (1,452) (68,270) $ (72,826) ¥ 146–2733856,982¥ 7,786¥ –324 387 167 8,095 ¥ 8,973 $ –2,817 3,365 1,452 70,392 $ 78,026 ¥ 33—-795¥ 828¥ — 354 – 244 ¥ 598 $ — 3,078 – 2,122 $ 5,200 Tax losses carried forwardDeferred tax assetsThe amount of tax losses carried forward in the above table is after multiplying by the statutory tax rate.15. Asset retirement obligations(a) Asset retirement obligations recorded on the consolidated balance sheets(1) Outline of asset retirement obligationsRecorded asset retirement obligations are expenses, such as the costs for the disposal of machinery and equipment owned by the Company that contain PCB (polychlorinated biphenyl) and the costs for the removal of asbestos from buildings owned by the Company when they are demolished.(2) Basis for calculating asset retirement obligationsAsset retirement obligations are based on estimates provided by companies specializing in making such estimates, such as construction companies.(3) Changes in the total amount of asset retirement obligations during the fiscal years ended December 31, 2020 and 2021 were as follows: Beginning balance Decrease due to the fulfillment of asset retirement obligationsChange in estimated asset retirement obligationsEnding balance¥ 256$ 2,226Millions of yenThousands of U.S. dollars2021/122021/12¥ 254-2$ 2,209 -172020/12¥ 277(1)(22)¥ 25418Financial Report 2021(b) Asset retirement obligations not recorded on the consolidated balance sheetsRegarding some plant sites and other properties used under real estate leasing agreements, the Company and its consolidated subsidiaries have obligations related to the cost of restoring such properties to their original state at the time of business termination or moving out. However, since there are uncertainties regarding the lease periods of the properties to which such obligations apply, because there are no plans to terminate or move out at this time, it is impossible to reasonably estimate the related asset retirement obligations. Therefore, no asset retirement obligations are recorded in connection with such obligations.16. Severance and retirement benefitsThe Company and its domestic consolidated subsidiaries provide mainly defined contribution pension plans. However, certain employees are provided unfunded lump-sum payment plans. The overseas consolidated subsidiaries provide funded lump-sum payment plans, defined contribution pension plans and defined benefit pension plans. For defined benefit pension plans, the reconciliation of opening and ending balances for projected benefit obligation for the fiscal years ended December 31, 2020 and 2021 was as follows:Projected benefit obligation at beginning of yearMillions of yen2020/12¥ (967)2021/12¥ (1,065)Thousands of U.S. dollars2021/12$ (9,261)Actuarial differencesService costInterest costBenefits paidOthersPlan assets at beginning of yearExpected return on plan assetsActuarial differencesContributions paid by employerBenefits paidOthers Projected benefit obligation at end of year¥ (1,065)$ (10,843)For defined benefit pension plans, the reconciliation of opening and ending balances for plan assets for the fiscal years ended December 31, 2020 and 2021 was as follows:Millions of yen2020/12¥ 272021/12¥ 29Thousands of U.S. dollars2021/12$ 252(88)(15)(27)28 4 011-0(87)(15)(27)58 (111)¥ (1,247)001(1)5(757)(130)(235)504(964)009(9)43Plan assets at end of year¥ 29¥ 34$ 295For defined benefit pension plans, the reconciliation of ending balances for projected benefit obligations and plan assets and the balances for net defined benefit liability recognized in the consolidated balance sheets for the fiscal years ended December 31, 2020 and 2021 were as follows:Projected benefit obligations of funded plansPlan assetsProjected benefit obligation of unfunded plansNet liabilities for severance and retirement benefits recognized in the consolidated balance sheets2020/12¥ (746)29 (717) (319)Millions of yen2021/12¥ (894)34 (860)(353)Thousands of U.S. dollars2021/12$ (7,773)295 (7,478)(3,070)(1,036)(1,213)(10,548)Net defined benefit liability(1,036)(1,213)(10,548)Net liabilities for severance and retirement benefits recognized in the consolidated balance sheets¥ (1,036)¥ (1,213)$ (10,548)19Nippon Electric GlassFor defined benefit pension plans, components of severance and retirement benefit expense for the fiscal years ended December 31, 2020 and 2021 were as follows:Millions of yen2020/12¥ 88 2021/12¥ 87 Thousands of U.S. dollars2021/12$ 757 Service costInterest costExpected return on plan assetsAmortization of actuarial differencesOthersSeverance and retirement benefit expense for defined benefit pension plans¥ 125 ¥ 122 $ 1,061 For defined benefit pension plans, the percentage composition by asset class of total plan assets for the fiscal years ended December 31, 2020 and 2021 was as follows:130 (0)226(52)15 (0)26 (4)2020/1248%9%43%100%15 (0)26(6)2021/1243%11%46%100%Equity securitiesBondsOthersTotalThe current and expected allocation of plan assets and the current and expected long-term rates of return for the various assets that constitute the plan assets are considered when determining the long-term expected rate of return on plan assets.For defined benefit pension plans, principal actuarial assumptions for the fiscal years ended December 31, 2020 and 2021 were as follows:Discount ratesLong-term expected rates of return on plan assetsExpected rates of pay raises2020/120.8 – 4.5%0.8%2.0 – 5.0%2021/120.5 – 4.5%0.5%2.0 – 5.0%The total amounts that the Company and its consolidated subsidiaries needed to contribute to the defined contribution pension plans were ¥1,888 million and ¥1,801 million ($15,661 thousand) for the fiscal years ended December 31, 2020 and 2021, respectively.17. Net assetsUnder Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common shares. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price of the new shares as additional paid-in capital, which is included in capital surplus.Under The Japanese Corporate Law (“the Law”), in cases in which a dividend distribution of surplus takes place, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common shares over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. The legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets. Under the Law, both of these appropriations generally require a resolution of the shareholders’ meeting.Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, which are potentially available for dividends, by a resolution of a shareholders’ meeting. The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of the Company in accordance with the Law.The Company purchased treasury stock of 3,630,100 shares based on the resolution of the Board of Directors held on September 29, 2021.At the annual shareholders’ meeting held on March 30, 2022, the shareholders approved cash dividends amounting to ¥5,582 million ($48,539 thousand), or ¥60.00 per share. In addition, the Company paid interim cash dividends of ¥4,833 million ($42,026 thousand), or ¥50.00 per share, on August 31, 2021.20Financial Report 202118. Contingent liabilitiesContingent liabilities at December 31, 2020 and 2021 were as follows: Notes receivable discountedGuarantees of employees’ housing loans Guarantees of bank loans for affiliated company accounted for by the equity method2020/12¥ 140 71 2,371Millions of yen2021/12¥ 28052 Thousands of U.S. dollars2021/12$ 2,435452 2,140 18,609 19. Segment informationInformation by segment for the fiscal years ended December 31, 2020 and 2021 was as follows:(a) Segment information (management approach) Outline of reportable segmentThe Company has adopted a business division system in which each business division develops a comprehensive strategy for the products it handles and conducts business activities based on that strategy. The Board of Directors periodically reviews decisions regarding the allocation of management resources to each business division and evaluates business performance.Although the Group may be considered to consist of multiple business segments that are handled by various business divisions, in general the “glass products” made by the Group companies are similar in terms of product characteristics, manufacturing methods, market and industry, customer type and marketing factors. Therefore, the Group has consolidated these segments into a single “Glass Business” segment. Accordingly, except for information given in the “Outline of reportable segment,” information for other segments has been omitted.(b) Related information(1) Information by products and services2020/122021/122021/12Sales to external customers Performance Materials and Others¥ 106,689¥ 242,886Glass BusinessMillions of yenGlass BusinessMillions of yenElectronics and Information Technology¥ 136,197Electronics and Information Technology¥ 154,557Electronics and Information Technology$ 1,343,974¥ 137,477¥ 292,034Thousands of U.S. dollarsGlass Business$ 1,195,452$ 2,539,426TotalTotalTotalSales to external customers Performance Materials and OthersSales to external customers Performance Materials and Others21Nippon Electric Glass(2) Geographical informationNet sales2020/12Japan¥ 38,1172021/122021/12Millions of yenU.S.¥ 30,859Millions of yenU.S.¥ 38,017 China¥ 77,108South Korea¥ 38,314Europe¥ 27,313Other areas¥ 31,175Total¥ 242,886JapanChina¥ 42,535 ¥ 86,606 South Korea¥ 48,461 Europe¥ 43,022 Other areas¥ 33,393 Total¥ 292,034 JapanChina$ 369,870 $ 753,096 South Korea$ 421,400 Thousands of U.S. dollarsU.S.Europe$ 330,583 $ 374,104 Other areas$ 290,373 Total$ 2,539,426 Notes: 1. The classifications of countries and areas are based on the location of customers. 2. The main country classified as “Other areas” is Taiwan.Property, plant and equipment2020/12Japan¥ 191,3952021/12Japan¥ 185,3432021/12Japan$ 1,611,678China¥ 57,935China¥ 88,061China$ 765,748Millions of yenMalaysia¥ 40,666Millions of yenMalaysia¥ 44,617Other areas¥ 65,732Total¥ 355,728Other areas¥ 62,260Total¥ 380,281Thousands of U.S. dollarsMalaysia$ 387,974Other areas$ 541,391Total$ 3,306,791Notes: 1. The classifications of countries and areas are based on the location of property, plant and equipment. 2. The main countries classified as “Other areas” are South Korea and the U.S.Millions of yenThousands of U.S. dollars 2020/12¥ 31,754 2021/12¥ 41