ソフトバンクグループ（9984） – Disclosed information on the Internet at the Time of Notifying Convocation of the 42nd Annual General Meeting of Shareholders

“This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between the translated document and the Japanese original, the original shall prevail. SoftBank Group Corp. assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.” To Our Shareholders: Disclosed information on the Internet at the Time of Notifying Convocation of the 42nd Annual General Meeting of Shareholders June 9, 2022 SoftBank Group Corp. ― 1 ― Table of Contents Business Report Status of SoftBank Group Corp. (5) Overview of system to ensure the appropriateness of the operation and its implementation status Consolidated Statement of Changes in Equity Non-consolidated Statement of Changes in Equity Notes to Consolidated Financial Statements Notes to Non-consolidated Financial Statements Page 3 Page 8 Page 10 Page 11 Page 84 All matters above are provided to shareholders of SoftBank Group Corp. on the website of SoftBank Group Corp. on the Internet (https://group.softbank/) in accordance with all laws and Article 14 of the Articles of Incorporation of SoftBank Group Corp. ― 2 ― Business Report Status of SoftBank Group Corp. (“SBG”) (5) Overview of system to ensure the appropriateness of the operation and its implementation status The overview of the system established in SBG to ensure the appropriateness of the operations and its implementation status is as follows. [1] System to ensure the appropriateness of operations System to ensure that the execution of duties by Board Directors and employees is in compliance with laws, regulations, and the Articles of Incorporation of SBG SBG has established the SoftBank Group Code of Conduct to be followed by all Board Directors and employees to ensure that corporate activities are appropriate based not only on regulatory compliance but also on high ethical standards, and has established the following structure to continuously reinforce the compliance system: 1. A Chief Compliance Officer (CCO) is appointed. In addition to proposing and carrying out measures required to establish and enhance SBG’s compliance system, the CCO periodically reports to the Board of Directors on compliance-related issues and the status of addressing those issues. 2. Internal and external whistle-blowing systems are established for direct reporting and consultations by Board Directors and employees to quickly identify, rectify, and prevent the reoccurrence of any inappropriate issues in corporate activities. SBG ensures that whistle-blowers will not be treated disadvantageously for having made reports by prohibiting such treatment of persons on such grounds in Whistle-blowing Regulations. 3. The Internal Audit Office carries out audits on the effectiveness of the system for compliance in line with laws, regulations, and the Articles of Incorporation, and the results of those audits are reported to the CEO. The Internal Audit Office also works in cooperation with the Board Directors including External Board Directors and the Audit & Supervisory Board Members including External Audit & Supervisory Board Members by explaining the results of those audits to the Board of Directors and the Audit & Supervisory Board. System for the storage and management of information regarding the execution of duties by Board Directors SBG has established the following system to appropriately store and maintain documents and other important information related to the execution of duties by Board Directors, including minutes and proposals of the Board of Directors meetings and requests for approval: 1. SBG determines retention periods and methods and measures to prevent accidents based on the Information Security Basic Regulations, etc. and classifies and appropriately stores these documents according to their degree of confidentiality. 2. SBG appoints a Chief Information Security Officer (CISO), and the CISO promotes the establishment and reinforcement of information security system of SBG. ― 3 ― Regulations and systems related to risk management SBG has established the following systems under the Chief Risk Officer (CRO) to ensure appropriate identification and response to risks and incidents in business operations in order to eliminate or reduce impediments to the sustainable growth of the Company, ultimately to improve the enterprise value of the entire Company. Risk Management Regulations. 1. Under the Company’s Risk Management Policy, SBG determines the following matters, based on the ・ Officers and employees of SBG strive to foresee risks associated with the execution of business and respond to the identified risks, as well as report to superiors and the like. ・ Each department appoints a risk manager, who conducts appropriate identification of and response to risks and incidents and reports any identified risks and the status of responses thereto to the Risk Management Office. ・ The Risk Management Office identifies and evaluates the risks and incidents of each department, and monitors the status of responses thereto. It also provides support and performs checks to ensure appropriate responses at each department. The Risk Management Office reports any material risks and incidents to the Board of Directors and the Group Risk and Compliance Committee. 2. The Internal Audit Office carries out audits on the effectiveness of the risk management processes. System to ensure the efficiency of Board Directors in the execution of their duties SBG has established the following structure to maintain an efficient management system: 1. SBG sets out the Board of Directors Regulations to clarify matters to be resolved by and reported to the Board of Directors and lays out the Internal Approval Regulations and other regulations related to institutional decision-making to clarify decision-making authority. 2. To strengthen functions for overseeing the execution of duties and enhance objectivity in management, the Board of Directors shall include External Board Directors who are independent of the Company. 3. To ensure that the Board Directors, including External Board Directors, can discuss matters fully at the Board of Directors meetings, SBG shall provide them with materials for the meeting in advance, and with additional or supplementary materials upon their request. 4. The scope of operations, authority and responsibilities necessary for operations are clearly defined in the Organization Management Regulations. System to ensure appropriateness of the Company’s operations SBG has formulated the SoftBank Group Charter to promote fundamental concepts and policies shared throughout the Company and Group Company Management Regulations of the SoftBank Group, which spell out the management policies and systems of group companies. In addition, the SoftBank Group Code of Conduct and the SoftBank Group Sustainability Principles are set out as policies with which the Company as well as its Board Directors and employees must comply. Based on the regulations, the following systems have been established, giving consideration to the scale and materiality of group companies: ― 4 ― 1. A Group Compliance Officer (GCO) is appointed to promote the establishment and reinforcement of groupwide compliance system, as the person ultimately responsible for compliance throughout the Company. A whistle-blowing system has also been established to receive reports and provide consultation to Board Directors and employees of group companies to quickly identify, rectify, and prevent the reoccurrence of any inappropriate issues in corporate activities. SBG ensures that persons who have reported or consulted through the whistle-blowing system will not be treated disadvantageously for having done so by prohibiting such treatment of persons on such grounds in Group Company Management Regulations of the SoftBank Group. 2. CISO of SBG promotes the establishment and reinforcement of the group information security governance system of the entire Group. 3. The representatives of group companies must submit a Representative Oath pertaining to the financial reports submitted to SBG, thereby ensuring the accuracy of the annual securities report and other documents submitted by the Group. 4. The Internal Audit Office comprehensively judges the results of past internal audits, the governance system, and the financial position of group companies, and carries out internal audits of group 5. SBG determines the following matters based on the Risk Management Policy and the Group companies deemed as having a high risk. Company Management Regulations. ・ Officers and employees of Group companies strive to foresee risks associated with the execution of business and respond to the identified risks, as well as report to superiors and the like. ・ Each Group company appoints a risk manager. ・ The risk manager of the Group company conducts appropriate identification of and response to risks and incidents of said Group company and reports any identified risks and the status of responses thereto to the Risk Management Office of SBG. The risk manager also provides support and performs checks to ensure appropriate identification of and response to risks and incidents in business units. In addition, the risk manager reports necessary risk information based on the instructions of the Risk Management Officer of SBG in order to conduct risk management across the Group. ・ The Risk Management Office of SBG identifies and evaluates the risks and incidents of the Group companies, and monitors the status of responses thereto under the supervision of the CRO. It also reports any material risks and incidents to the Board of Directors and the Group Risk and Compliance Committee. System for excluding organized crime and other criminal elements SBG clearly states in the SoftBank Group Code of Conduct its policy of having absolutely no association with organized crime and other criminal elements that pose a threat to public order and safety. The General Administration Department is responsible for dealing with inappropriate requests from organized crime and other criminal elements and will firmly refuse those requests in a resolute manner in cooperation with the police and other external specialist institutions. ― 5 ― System related to support personnel who assist the Audit & Supervisory Board Members, matters related to the independence of the relevant employees from the Board Directors, and matters related to ensuring the effectiveness of instructions given to the relevant employees SBG has established the Audit & Supervisory Board Office as an organization to support the work of the Audit & Supervisory Board Members, and assigns dedicated staff to this department. Directions and instructions to the support staff are issued by the Audit & Supervisory Board Members to ensure the effectiveness of the instructions, and any personnel changes, evaluations, or other such actions require the agreement of the Audit & Supervisory Board Members. System for reporting to the Audit & Supervisory Board Members Board Directors and employees of SBG shall report the following matters to the Audit & Supervisory Board Members: 1. Important matters related to the management, finances, or business execution of the Company 2. Matters related to the compliance system or use of the whistle-blowing system 3. The development status of internal control system 4. Matters that could cause significant damage to SBG 5. Matters related to violations of laws, regulations, or the Articles of Incorporation 6. Results of audits conducted by the Internal Audit Office 7. Other matters that the Audit & Supervisory Board Members deem necessary to be reported in order for them to execute their duties Other systems to ensure that the audits by the Audit & Supervisory Board Members are conducted effectively 1. When the Audit & Supervisory Board Members deem it necessary, opportunities shall be provided for them to interview Board Directors or employees of the Company. In addition, the Audit & Supervisory Board Members periodically meet with the Independent Auditor and the Audit & Supervisory Board Members of major subsidiaries and other entities to exchange information and ensure cooperation. 2. SBG ensures that persons who have reported or consulted on matters related to compliance, including report or consultation to the Audit & Supervisory Board Members, will not be treated disadvantageously for having done so by prohibiting such treatment of persons on such grounds in Whistle-blowing Regulations and Group Company Management Regulations of the SoftBank Group. 3. SBG shall pay expenses related to the Independent Auditor, attorneys, and other professionals, and other expenses associated with the execution of duties by the Audit & Supervisory Board Members. [2] Overview of the implementation status of the system to ensure the appropriateness of the operations Matters concerning compliance SBG continues to conduct compliance training for Board Directors and employees of the Company, as well as having the GCO share information, give advice, and so forth, as necessary to the CCO of group companies for enhancing the compliance system. In addition, SBG works to ensure the effectiveness of compliance of the entire group by establishing and operating a whistle-blowing system so that Board Directors and employees of the Company can report and consult directly. The effects of these measures are reviewed to make improvements as necessary. ― 6 ― Matters concerning risk management Based on the Company’s Risk Management Policy, Risk Management Regulations, and the Group Company Management Regulations of the SoftBank Group, each department of SBG and the officers, employees and risk managers of the Group companies conduct appropriate identification of and response to risks and incidents in order to eliminate or reduce impediments to the sustainable growth of the Company. The Risk Management Office of SBG also identifies, evaluates and monitors the risks and incidents of each department and the Group companies. Furthermore, the Risk Management Office reports any material risks and incidents to the Board of Directors and the Group Risk and Compliance Committee. Matters concerning group management In managing and overseeing group companies as a holding company, SBG has established compliance with the SoftBank Group Charter, Group Company Management Regulations of the SoftBank Group, the SoftBank Group Code of Conduct and the SoftBank Group Sustainability Principles, which are applied to the Company. Reviewing as necessary such internal rules based on changes in the social environment and the status of the Company, SBG continuously works on enhancing and strengthening the Company’s management system. Matters concerning internal audits Based on the Internal Audit Regulations, the Internal Audit Office carries out audits on the effectiveness of the system for compliance with laws, regulations, and the Articles of Incorporation as well as the risk management process at SBG. In addition, the department continuously carries out audits of group companies deemed as having a high risk and reports the results of the audits to the CEO each time. The Internal Audit Office also works in cooperation with the Board Directors including External Board Directors and the Audit & Supervisory Board Members including External Audit & Supervisory Board Members by explaining the results of those audits to the Board of Directors and the Audit & Supervisory Board. Matters concerning the execution of duties by Board Directors and employees SBG ensures efficiency in the execution of duties by its Board Directors and employees based on internal regulations such as the Board of Directors Regulations and Internal Approval Regulations. SBG also ensures an environment where matters can be fully discussed at the Board of Directors meetings by Board Directors, including Independent External Board Directors. Matters concerning the execution of duties by Audit & Supervisory Board Members The Audit & Supervisory Board Members attend SBG’s important meetings and arrange opportunities to interview Board Directors and employees of the Company as necessary. In addition, they continue to enhance cooperation by holding regular meetings with the Independent Auditor and the Audit & Supervisory Board Members and other personnel of major subsidiaries. Through these efforts, the Audit & Supervisory Board Members ensure the effectiveness of audits. ― 7 ― As of April 1, 2021 Comprehensive income Net income Other comprehensive income Total comprehensive income Transactions with owners and other transactions Cash dividends Distribution to owners of other equity instruments Transfer of accumulated other comprehensive income to retained earnings Purchase and disposal of treasury stock Retirement of treasury stock Changes from loss of control Changes in interests in subsidiaries Changes in associates’ interests in their subsidiaries Share-based payment transactions Other Total transactions with owners and other transactions As of March 31, 2022 Consolidated Statement of Changes in Equity (Fiscal year ended March 31, 2022) (Millions of yen)Equity attributable to owners of the parent Common stock Capital surplus Other equity instruments Retained earnings Treasury stock 238,772 2,618,504 496,876 8,810,422 (2,290,077) – – – – – – – – – – – (1,708,029) – (1,708,029) (75,947) (32,043) (114) – – – – – – – – – – – – – – – – – – – (2,768) (592,150) (2,475,817) 2,475,817 238,772 2,634,574 496,876 4,515,704 (406,410) (2,586,689) 1,883,667 – – – – – – – – – – – – – – – – – – – – – – – 15,897 (1,489) 1,605 57 16,070 ― 8 ― (Millions of yen)Equity attributable to owners of the parent Accumulated other comprehensive income Subtotal Total Non- controlling interests Total equity As of April 1, 2021 338,329 10,212,826 267 10,213,093 1,742,500 11,955,593 Other comprehensive income 2,157,715 2,157,715 2,157,448 (4,038) 2,153,410 Total comprehensive income 2,157,715 449,686 449,419 241,792 691,211 – (1,708,029) – (1,708,029) 245,830 (1,462,199) Comprehensive income Net income Transactions with owners and other transactions Cash dividends Distribution to owners of other equity instruments Transfer of accumulated other retained earnings Purchase and disposal of treasury stock Retirement of treasury stock Changes from loss of control Changes in interests in subsidiaries Changes in associates’ interests in their subsidiaries Share-based payment transactions Other Total transactions with owners and other transactions As of March 31, 2022 Accumulated other comprehensive income directly relating to assets classified as held for sale (267) (267) – – – – – – – – – – – – – – – – – – – – – (75,947) (32,043) – – – 15,897 (1,489) 1,605 57 (75,947) (303,172) (379,119) (32,043) (32,043) – – – – – (18,156) (18,156) 15,897 38,013 53,910 (1,489) (1,489) 1,605 26,221 27,826 57 4,890 4,947 – – – – – comprehensive income to 114 (594,918) (594,918) (594,918) 114 (686,838) (686,838) (252,204) (939,042) 2,496,158 9,975,674 9,975,674 1,732,088 11,707,762 ― 9 ― Non-consolidated Statement of Changes in Equity (For the fiscal year from April 1, 2021 to March 31, 2022) （Millions of yen） Shareholders’ equity Capital surplus Retained earnings Capital stock Legal capital surplus Total capital surplus Legal retained earnings Other retained earnings Retained earnings brought forward Total retained earnings Balance as of April 1, 2021 ¥238,772 ¥472,079 ¥472,079 ¥1,414 ¥4,867,313 ¥4,868,727 Changes in items during period Dividends of surplus Net loss Purchase of treasury shares Disposal of treasury shares Retirement of treasury shares Net changes items other than shareholders’ equity in items in Total changes during period Balance as of March 31, 2022 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― (75,947) (352,390) (602,361) (602,361) 10,211 7,443 2,475,817 ― ― Changes in items during period Dividends of surplus Net loss Purchase of treasury shares Disposal of treasury shares Retirement of treasury shares Net changes in items other than shareholders’ equity in items Total changes during period Balance as of March 31, 2022 ¥238,772 ¥472,079 ¥472,079 ¥1,414 ¥1,960,392 ¥1,961,806 Shareholders’ equity Valuation and translation adjustments Treasury shares Total shareholders’ equity Valuation difference on available-for-sale securities ¥234,926 Total valuation and translation adjustments Subscription rights to shares Total net assets Balance as of April 1, 2021 ¥(2,290,077) ¥3,289,502 ¥234,926 ¥11,692 ¥3,536,120 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― (75,947) (75,947) (352,390) (352,390) ― ― (2,768) (2,768) (2,475,817) (2,475,817) ― ― (2,906,921) (2,906,921) ― ― ― ― ― (75,947) (352,390) (602,361) 7,443 ― ― 247,482 247,482 (592) 246,890 1,883,667 (1,023,255) 247,482 247,482 (592) (776,365) ¥(406,410) ¥2,266,247 ¥482,408 ¥482,408 ¥11,100 ¥2,759,755 ― 10 ― Notes to Consolidated Financial Statements (Basis of Presentation of Consolidated Financial Statements) 1. Basis of preparation of the consolidated financial statements The consolidated financial statements of SoftBank Group Corp. and its subsidiaries are prepared on the basis of International Financial Reporting Standards (“IFRSs”) pursuant to the provisions of the second sentence of the first paragraph of Article 120 of the Ordinance on Company Accounting, which allows companies to prepare consolidated financial statements with the omission of certain disclosures required under IFRSs. Company names and abbreviations used in the notes, except as otherwise stated or interpreted differently in the context, are as follows: Company names / Abbreviations Definition SoftBank Group Corp. SoftBank Group Corp. (stand-alone basis) The Company SoftBank Group Corp. and its subsidiaries * Each of the following names or abbreviations indicates the respective company and its subsidiaries, if any. SB Northstar or the asset management subsidiary SB Northstar LP SoftBank Vision Fund L.P. and its alternative investment vehicles SoftBank Vision Fund II-2 L.P. and its alternative investment vehicles SVF2 LLC SVF II Investment Holdings LLC SVF1 SVF2 SBIA SBGA Arm Fortress Sprint Alibaba WeWork MgmtCo SoftBank Latin America Funds SBLA Latin America Fund LLC SB Investment Advisers (UK) Limited SB Global Advisers Limited Arm Limited Fortress Investment Group LLC Sprint Corporation Alibaba Group Holding Limited WeWork Inc. MASA USA LLC ― 11 ― Beginning of the fiscal year ended March 31, 2022, the description presented in the names of accounts has been changed as follows: Consolidated Statement of Financial Position Previous Current Third-party interests in SVF1 Third-party interests in SVF1 and SVF2 Consolidated Statement of Income Previous Current Change in third-party interests in SVF1 Change in third-party interests in SVF1 and SVF2 2. Scope of consolidation Number of consolidated subsidiaries: 1,316 Names of main consolidated subsidiaries Limited, SBLA Latin America Fund LLC SoftBank Group Capital Limited, SoftBank Vision Fund L.P., SoftBank Vision Fund II-2 L.P., SoftBank Corp., Arm Name of the main entity newly consolidated and the reason thereof SB Global Advisers Limited Newly established Name of the main entity excluded from consolidation and the reason thereof Boston Dynamics, Inc. Sale of the stock held 3. Scope of entities applying equity method Number of entities applying the equity method: 493 Name of the primary entity applying the equity method Alibaba Group Holding Limited Name of the main associate not accounted for under the equity method and the reason thereof WeWork Inc. Investments in associates made by SVF1 and SVF2 are investments held indirectly through venture capital organizations. Therefore, these investments are measured at fair value through profit or loss in accordance with Paragraph 18 of IAS 28 “Investments in Associates and Joint Ventures.” In addition, common stock investments previously accounted for using the equity method continue to be accounted for using the equity method after the transfer of WeWork common shares to SVF2. 4. Matters regarding the equity method associates for the current fiscal year The Company applies the equity method to its investment in Alibaba, an associate of the Company, on a three-month time lag, as it is impracticable to unify the reporting period of Alibaba due to the contract with Alibaba. Adjustments are made for significant transactions or events that occur during the intervening period and are publicly announced by Alibaba. ― 12 ― 5. Summary of significant accounting policies (1) Evaluation standards and methods for financial instruments a. Financial instruments Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are measured at fair value at the time of initial recognition. Transaction costs that are directly attributable to the acquisition of financial assets and issuance of financial liabilities other than financial assets measured at fair value through profit or loss (“financial assets at FVTPL”) and financial liabilities at fair value through profit or loss (“financial liabilities at FVTPL”) are added to the fair value of the financial assets or deducted from the fair value of financial liabilities at the time of initial recognition. Transaction costs that are directly attributable to the acquisition or issuance of the financial assets at FVTPL or financial liabilities at FVTPL are recognized in profit or loss. b. Non-derivative financial assets Non-derivative financial assets are classified as “financial assets at amortized cost,” “debt financial assets at fair value through other comprehensive income” (“debt financial assets at FVTOCI”), “equity financial assets at fair value through other comprehensive income (“equity financial assets at FVTOCI”)”, and “financial assets at FVTPL.” The classification depends on the nature and purpose of the financial assets and is determined upon initial recognition. All purchases and sales of financial assets made in the ordinary course of business are recognized and derecognized on a trade date basis. Purchases and sales made in the ordinary course of business refer to acquiring or disposing of financial assets under a contract that requires the delivery of assets within a timeframe established by regulation or convention in the marketplace. (a) Financial assets measured at amortized cost Financial assets are classified as “financial assets measured at amortized cost” if both of the following conditions are met: ・the financial assets are held within a business model for which the objective is to hold financial assets to collect contractual cash flows; and ・the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Subsequent to initial recognition, financial assets at amortized cost are measured at amortized cost using the effective interest method, less any impairment. Interest income based on the effective interest rate is recognized in profit or loss. (b) Debt financial assets at FVTOCI Financial assets are classified as “debt financial assets at FVTOCI” if both of the following conditions are met: ・the financial assets are held within a business model for which the objective is achieved by both collecting contractual cash flows and selling financial assets; and ・the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Subsequent to initial recognition, debt financial assets at FVTOCI are measured at fair value, and gains or losses arising from changes in fair value are recognized in other comprehensive income. Any cumulative amounts recognized in other comprehensive income are reclassified to profit or loss upon derecognition. Foreign exchange gains and losses arising on monetary financial assets classified as debt financial assets at FVTOCI and interest income calculated using the effective interest method relating to debt financial assets at FVTOCI are recognized in profit or loss. ― 13 ― (c) Equity financial assets at FVTOCI At initial recognition, the Company has made an irrevocable election for equity financial assets that would otherwise be measured at fair value through profit or loss to present subsequent changes in fair value in other comprehensive income and classifies such investments as “equity financial assets at FVTOCI.” Subsequent to initial recognition, equity financial assets at FVTOCI are measured at fair value, and gains or losses arising from changes in fair value are recognized in other comprehensive income. When financial assets are derecognized or there is a significant or prolonged decline in fair value below the cost, cumulative gains and losses recognized in other comprehensive income are directly transferred to retained earnings. Dividends received on equity financial assets at FVTOCI are recognized in profit or loss. (d) Financial assets at FVTPL Financial assets are classified as “financial assets at FVTPL,” if they are classified as neither “financial assets at amortized cost,” “debt financial assets at FVTOCI,” nor “equity financial assets at FVTOCI.” Please refer to “(13) Significant accounting policies for the SoftBank Vision Funds segment” for the details of “Investments from SVF1 and SVF2 accounted for using FVTPL” in the consolidated statement of financial position. Neither financial assets are designated as measured at fair value through profit or loss to eliminate or significantly reduce an accounting mismatch. Subsequent to initial recognition, financial assets at FVTPL are measured at fair value, and gains or losses arising from changes in fair value, dividend income, and interest income are recognized in profit or loss. (e) Impairment of financial assets A loss allowance is recognized for expected credit losses on financial assets at amortized cost, debt financial assets at FVTOCI, and contract assets under IFRS 15, “Revenue from Contracts with Customers.” At each fiscal period end, the Company assesses whether the credit risk on financial assets has increased significantly since initial recognition. If the credit risk on financial assets has not increased significantly since initial recognition, the Company measures the loss allowance for financial assets at an amount equal to the 12-month expected credit losses. If the credit risk on financial assets has increased significantly since initial recognition, or for credit impaired financial assets, the Company measures the allowance account for the financial assets at an amount equal to the lifetime expected credit losses. However, the Company always measures the loss allowance at an amount equal to the lifetime expected credit losses for trade receivables and contract assets. Expected credit losses are estimated in a way that reflects the following: ・an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; ・the time value of money; and ・reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions, and forecasts of future economic conditions. Provision of the loss allowance relating to the measurement is recognized in profit or loss. Reversal of the loss allowance is also recognized in profit or loss when events that would reduce the loss allowance occur in subsequent periods. The carrying amount of financial assets is directly reduced against the loss allowance when the Company has no reasonable expectations of recovering financial assets in their entirety, or a portion thereof. (f) Derecognition of financial assets The Company derecognizes a financial asset when, and only when the contractual rights to the cash flows from the financial asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset. ― 14 ― c. Non-derivative financial liabilities Non-derivative financial liabilities are classified into “financial liabilities at FVTPL” or “financial liabilities at amortized cost”, and the classification is determined at initial recognition. Non-derivative financial liabilities are classified into “financial liabilities at FVTPL” when the entire hybrid contract, including more than one embedded derivative, is designated as financial liabilities at FVTPL. Subsequent to initial recognition, financial liabilities at FVTPL are measured at fair value, and gains or losses arising from changes in fair value and interest costs are recognized in profit or loss. Financial liabilities measured at amortized cost are measured using the effective interest method subsequent to The Company derecognizes financial liabilities when the Company’s obligations are met or debt is discharged, the initial recognition. cancelled, or expires. d. Derivatives and hedge accounting (a) Derivatives The Company is engaged in derivative transactions, including foreign currency forward contracts, currency swaps, option contracts and collar transactions in order to manage its exposure to foreign exchange rates, interest rates and share price risks. Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are substantially measured at their fair values at the end of the fiscal year. Changes in the fair value of derivatives are recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument. Derivative financial assets not designated as hedging instruments are classified into “financial assets at FVTPL”, and derivative financial liabilities not designated as hedging instruments are classified into “financial liabilities at FVTPL.” (b) Hedge accounting cash flow hedges. The Company designates certain derivative transactions as hedging instruments and accounts for them as At the inception of the hedge, the Company formally designates and documents the hedge relationship qualifying for hedge accounting, along with its risk management objectives and its strategies for undertaking various hedge transactions. At the inception of the hedge and on an ongoing basis, the Company evaluates whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the relevant hedged item during the underlying period. Specifically, a hedge is determined to be effective when all of the following criteria are met: (i) there is an economic relationship between the hedged item and the hedging instrument; (ii) the effect of credit risk does not dominate the value changes that result from that economic relationship; and (iii) the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item the Company actually hedges and the quantity of the hedging instrument the Company actually uses to hedge the quantity of the hedged item. If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective remains the same, the Company adjusts the hedge ratio so that the hedging relationship becomes effective again. ― 15 ― The effective portion of changes in the fair value of derivatives that are designated and qualifying as cash flow hedges is recognized in other comprehensive income and accumulated in equity. Accumulated other comprehensive income is transferred to profit or loss through a line item relating to the hedged item in the consolidated statement of income in the year when the cash flows from the hedged item affect profit or loss. Any ineffective portion of changes in fair value of derivatives is recognized immediately in profit or loss. When the hedged forecasted transaction subsequently results in the recognition of non-financial assets or non-financial liabilities, the Company transfers the accumulated other comprehensive income previously recognized in other comprehensive income and includes them in the measurement of initial cost of the non-financial assets or non-financial liabilities (basis adjustment). The Company discontinues hedge accounting prospectively only when the hedging relationship ceases to meet the qualifying criteria, such as instances when the hedging instrument expires or is sold, terminated, or exercised. When hedge accounting is discontinued, any related income included in accumulated other comprehensive income remains in equity and is reclassified to profit or loss when the forecasted transaction is ultimately recognized in profit or loss. When a forecasted transaction is no longer expected to be occurred, any related income included in accumulated other comprehensive income is immediately reclassified to profit or loss. (c) Embedded derivatives Derivatives embedded in non-derivative financial assets host contracts (“embedded derivatives”) are not separated from the host contracts and accounted for as hybrid contracts in its entirety. When the economic characteristics and risks of the derivatives embedded in non-derivative financial liabilities host contracts (“embedded derivatives”) are not closely related to the economic characteristics and risks of the host contracts and the whole financial instruments, including the embedded derivatives, are not classified as financial liabilities at FVTPL, the embedded derivatives are separated from the host contracts and accounted for separately as derivatives. If it is required to separate embedded derivatives from their host contracts, but the Company is unable to measure the embedded derivatives separately either at acquisition or at the end of a subsequent fiscal period, the Company designates and accounts for the entire hybrid contract as financial liabilities at FVTPL. (2) Evaluation standards and methods for inventories Inventories are stated at the lower of cost or net realizable value. Inventories mainly consist of mobile devices and accessories. Their costs comprise all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. The costs are mainly calculated by the moving-average method. Net realizable value is calculated based on the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. ― 16 ― (3) Evaluation standards, valuation methodologies, and depreciation or amortization methods for property, plant and equipment and intangible assets a. Property, plant and equipment The Company uses the cost model for measurement of property, plant and equipment in which the assets are measured on a historical cost basis, less accumulated depreciation and accumulated impairment losses. Historical cost includes costs directly attributable to the acquisition of the asset and the initial estimated costs related to disassembly, retirement, and site restoration. Property, plant and equipment are depreciated mainly using the straight-line method over the estimated useful lives of each component. The depreciable amount is calculated as the cost of an asset, less its residual value. Land and construction in progress are not depreciated. The estimated useful lives of major components of property, plant and equipment are as follows: Buildings and structures Buildings Structures Building fixtures Telecommunications equipment Wireless equipment, switching equipment, and other network equipment Towers Other Other Machinery Other Furniture, fixtures, and equipment Leased mobile devices Power plant and related equipment 20 – 50 years 10 – 50 years 3 – 22 years 5 – 15 years 10 – 42 years 5 – 30 years 2 – 3 years 2 – 25 years 35 years 3 – 5 years The depreciation methods, useful lives, and residual values of assets are reviewed at the end of each fiscal year, and any changes are applied prospectively as a change in accounting estimate. ― 17 ― b. Intangible assets The Company uses the cost model for measurement of intangible assets in which the assets are measured at historical cost, less accumulated amortization and accumulated impairment losses. Intangible assets acquired individually are measured at cost upon initial recognition. Intangible assets acquired in a business combination are recognized separately from goodwill upon initial recognition and are measured at fair value at the acquisition date. Any internally generated research and development expenditure is recognized as an expense in the period in which it is incurred, except for expenditures on development activities eligible for capitalization (internally generated intangible assets). The amount initially recognized for internally generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets all of the capitalization criteria to the date the development is completed. There are intangible assets with finite useful lives and intangible assets with indefinite useful lives. The intangible assets with finite useful lives are amortized over the estimated useful lives by the straight-line method. The estimated useful lives of major categories of intangible assets with finite useful lives are as follows: Customer relationships Software Technologies Spectrum migration costs Management contracts Trademarks (with finite useful lives) Other 11 – 25 years 5 – 10 years 8 – 20 years 18 years 5 – 10 years 8 – 10 years 2 – 20 years Amortization methods, useful lives, and residual values of assets are reviewed at the end of each fiscal year, and any changes are applied prospectively as a change in accounting estimate. Spectrum migration costs are the amounts that the Company incurred in connection with the costs arising from the migration of the existing users to the other frequency spectrum, which is assigned to SoftBank Corp, based on the termination campaign. Useful lives are estimated based on the actual utilization of the frequency spectrum in the past. Intangible assets with indefinite useful lives are as follows: ・ Trademarks (with indefinite useful lives) The intangible assets with indefinite useful lives and the intangible assets that are not yet available for use are not amortized. The impairment of these assets is described in “(6) Impairment of property, plant and equipment; right-of-use assets; intangible assets; and goodwill.” The Company does not apply IFRS 16 “Leases” to leases of intangible assets. ― 18 ― (4) Lease a. Overall (a) Identifying a lease At inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company deems a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If the following conditions are met, the Company deems that the contract conveys the right to control the use of an identified asset. i. The use of the identified asset is specified in a contract and the lessor does not have the right to substitute ii. Throughout the period of use, the lessee has the right to obtain substantially all of the economic benefits the asset. from use of the identified asset. iii. The lessee has the right to direct the use of the identified asset. Where the relevant decisions about how and for what purpose the asset is used are predetermined, the lessee is deemed to have the right to direct the use of the identified asset if: ・the lessee has the right to operate the asset; or ・the lessee designed the asset in a way that predetermines how and for what purpose the asset will be used. (b) Lease term and option. The lease term is determined as the non-cancellable period of a lease, together with both: ・periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; ・periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that ― 19 ― b. Lessee (a) Separating components of a contract For a contract that is, or contains, a lease, the Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract by allocating the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. (b) Lease transactions of intangible assets The Company does not apply IFRS 16 “Leases” to leases of intangible assets. (c) Right-of-use asset At the commencement date, the Company recognizes a right-of-use asset and a lease liability. The right-of-use asset is initially measured at cost. The cost of the right-of-use asset comprises: the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date; any initial direct costs; and an estimate of costs to be incurred in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset; less any lease incentives received. After the initial measurement, the right-of-use asset is depreciated on a straight-line basis: (a) over the estimated useful life if the transfer of ownership of the underlying asset is certain; or (b) over the shorter of the lease term or the estimated useful life of the leased asset if the transfer of ownership is not certain. The estimated useful life of the right-of-use asset is determined by the same method applied to property, plant and equipment. Further, if the right-of-use asset is impaired, an impairment loss is deducted from the carrying amount of the right-of-use asset. (d) Lease liability At the commencement date, the Company measures the lease liability at the present value of the lease payments that will be paid over the lease term after that date. In calculating the present value, the interest rate implicit in the lease is used as a discount rate if that rate can be readily determined. If that rate cannot be readily determined, the Company’s incremental borrowing rate is used. The lease payments included in the measurement of the lease liability mainly comprise: fixed payments; lease payments to be made during extension periods, if the lease term reflects the exercise of an option to extend the lease; and payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. After the initial measurement, the lease liability is measured at amortized cost using an effective interest method. The lease liability is remeasured if there is a change in future lease payments resulting from a change in an index or a rate, if there is a change in the amounts expected to be payable under a residual value guarantee, or if there is a change in the assessment of the possibility of an option to extend or terminate the lease being exercised. If the lease liability is remeasured, the carrying amount of the right-of-use asset is also adjusted by the amount of the remeasurement of the lease liability. However, if the amount of liability reduced by the remeasurement of the lease liability exceeds the carrying amount of the right-of-use asset, any remaining amount of the remeasurement after reducing the right-of-use asset to zero is recognized in profit or loss. ― 20 ― For a contract that is, or contains, a lease, the Company allocates the consideration in the contract applying IFRS 15 “Revenue from Contracts with Customers” to lease components and non-lease components of the c. Lessor (a) Separating components of a contract contract. (b) Classification of leases At the commencement of a lease contract, the Company classifies whether the contract is a finance lease or an operating lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise, a lease is classified as an operating lease. The Company assesses that substantially all the risks and rewards incidental to ownership of an underlying asset are transferred in cases where the lease term is for a major part of the economic life of the underlying asset, or the amount of present value of the lease payments is substantially all the amount of fair value of the asset. (c) Sublease classification If the Company is a party to a sublease contract, the Company accounts for the head lease (lessee) and the sublease (lessor) separately. When classifying the sublease as a finance lease or an operating lease, the Company considers the risks and rewards incidental to, and the useful life of, the right-of-use asset that is recognized by the Company in the head lease, instead of that of the leased asset. (d) Recognition and measurement Lease receivables in finance leases are recorded as the uncollected amount of net lease receivables, as of the date the lease is determined and through its maturity. Lease receivables are apportioned between financing income and the repayments of the lease receivables. Lease receivables are measured at amortized cost using the effective interest method. Interest income based on the effective interest rate is recognized in profit or loss. Total lease payments received from operating leases received during the lease term are recognized as income on a straight-line basis over the lease term. (5) Accounting treatment of goodwill Please refer to “(12) Accounting treatment for business combinations” for the measurement of goodwill at initial recognition. Goodwill is measured at cost, less accumulated impairment losses. Goodwill is not amortized and is tested for impairment when there is an indication of impairment in cash-generating units or groups of cash-generating units to which goodwill has been allocated, and annually, regardless of any indication of impairment. Impairment is described in “(6) Impairment of property, plant and equipment; right-of-use assets; intangible assets; and goodwill.” Any excess of the cost of acquisition of an associate or joint venture over the Company’s interest in the net fair value of the identifiable assets and liabilities recognized at the date of acquisition is recognized as goodwill and included within the carrying amount of investment in the relevant company. Because goodwill is not separately recognized, it is not tested for impairment separately. Instead, the entire carrying amount of the investment in associates or joint ventures, including goodwill, is tested for impairment as a single asset whenever objective evidence indicates the investment may be impaired. ― 21 ― (6) Impairment of property, plant and equipment; right-of-use assets; intangible assets; and goodwill a. Impairment of property, plant and equipment; right-of-use assets; and intangible assets At the end of fiscal year, the Company determines whether there is any indication that property, plant and equipment, right-of-use assets; and intangible assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The intangible assets with indefinite useful lives and intangible assets that are not yet available for use are tested for impairment annually, regardless of whether there is any indication of impairment. The recoverable amount is the higher of fair value, less costs to sell, or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects the time value of money and the risks specific to the asset. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, and an impairment loss is recognized in profit or loss. At the end of the fiscal year, the Company evaluates whether there is any indication that an impairment loss recognized in prior years for assets other than goodwill has decreased. If such indication of a reversal of an impairment loss exists, the recoverable amount of the asset or cash-generating unit is estimated. If the recoverable amount of an asset or cash-generating unit is estimated to be higher than its carrying amount, a reversal of an impairment loss is recognized to the extent the increased carrying amount does not exceed the lower of the recoverable amount or the carrying amount (less depreciation and amortization) that would have been recognized had no impairment loss been recognized. b. Impairment of goodwill that goodwill may be impaired. At the end of the fiscal year and at the end of each quarter, the Company determines whether there is any indication Goodwill is allocated to each of the cash-generating units or groups of cash-generating units that are expected to benefit from the synergies arising from the business combination, and it is tested for impairment annually, regardless of any indication of impairment, and when there is an indication that the cash-generating unit or groups of cash-generating units may be impaired. If, at the time of the impairment test, the recoverable amount of the cash-generating unit or groups of cash-generating units is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit or groups of cash-generating units and then to the other assets pro rata based on the carrying amount of each asset in the unit Any impairment loss for goodwill is recognized directly in profit or loss and will not be reversed in subsequent or groups of cash-generating units. periods. ― 22 ― (7) Criteria for recording significant provisions Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are measured using the estimated future cash flows, discounted using a pretax rate reflecting the time value of money and the specific risks of the liability, after taking into account the risks and uncertainties surrounding the obligation at the end of the fiscal year. The Company mainly recognizes asset retirement obligations and provisions for loss on contract. For provisions for loss on contract, the amount of losses is estimated and recorded as deemed necessary to prepare for future losses incurred in fulfilling contracts with customers. ― 23 ― The Company’s main accounting policy for revenue recognition is as follows: (8) Revenue recognition SoftBank segment Corporation and LINE Corporation. a. Consumer business (a) Mobile services and sales of mobile devices The SoftBank segment provides mobile services, sales of mobile devices, broadband services and solutions services in Japan, mainly through SoftBank Corp., and internet advertising and e-commerce business through Yahoo Japan The Company provides mobile services, which consist of voice call services, data transmission services, and related optional services to subscribers, and sells mobile devices to customers. In providing mobile services, sales revenue is mainly generated from basic monthly charges, mobile services, and other fees. Revenues from the sales of mobile devices are generated from the sales of mobile devices and accessories to subscribers or dealers. The business flow of the above transactions consists of “Indirect” sales, where the Company sells mobile devices to dealers and enters into mobile communications service contracts with subscribers through dealers, and “Direct” sales, where the Company sells mobile devices to subscribers and enters into mobile communications service contracts directly with subscribers. In mobile services, the contractual period is defined as the period in which the party to the contract has present enforceable rights and obligations based on the terms of the contract with the subscriber. If the subscriber is granted an option to renew the contract and it is determined that the option provides the subscriber with a ”material right”, a separate performance obligation is identified. As a practical alternative to estimating the stand-alone selling price of the option that represents a performance obligation, the Company allocates the transaction price to the mobile communications services related to the option by reference to the mobile communications services expected to be provided and the corresponding expected consideration. Basic charges and mobile service fees are billed to subscribers on a monthly basis and are generally due within one month. Mobile device payments for indirect sales are billed to dealers at the time of sale to the respective dealers and are generally due within one month. In addition, mobile device payments for direct sales can be paid in full at the time of sale or paid in monthly installment over the contract period, normally due within one month. As a result of both quantitative and qualitative analysis, the Company has determined that these transaction prices do not include significant financing components due to the timing of payments and have not been adjusted for such financing components. When the period between the revenue recognition and the payment is one year or less, the Company does not make an adjustment for significant financing components, as a practical expedient. For mobile services and sales of mobile devices, the Company is obliged to allow returns and provide refunds for a certain period of time after the inception of the contract. Return and refund obligations are estimated and deducted from transaction prices for each type of goods and services based on historical experience. The Company provides optional additional warranty services for mobile devices. Under the contracts in which these services are provided, the services are identified as separate performance obligations, and are recognized as revenue when they are provided to subscribers. ― 24 ― Revenues from the sales of mobile devices are recognized when mobile devices are delivered to dealers, which is when dealers are deemed to have obtained control over the mobile devices. Dealers involved in indirect sales have the primary responsibility for fulfilling contracts, carry all inventory risk, and may independently establish their own inventory pricing. Accordingly, the Company considers that dealers involved in indirect sales act as Basic monthly charges and mobile service fees are recognized as revenue over time during the contractual period because the performance obligation of mobile services is to provide a certain amount of data communications monthly to subscribers during the contractual period. Discounts on mobile communications charges are deducted from the revenues recognized from monthly mobile services. Commission fees paid to dealers related to the sales of mobile devices are deducted from sales. i Indirect sales principals. ii Direct sales For direct sales, the total amount of transaction prices is allocated to sales of mobile devices and mobile services revenue based on the ratio of their stand-alone selling prices, as the revenues from the sales of mobile devices and mobile services, including related fees, are considered to be one transaction. Discounts on mobile communications charges related to mobile service revenue are deducted from the total transaction price. In addition, if the amount of revenue recognized at the time of sales of mobile devices exceeds the amount of consideration received from the subscribers, the difference is recognized as contract assets and subsequently transferred to trade receivables when the claim is determined as a result of the provision of mobile services. If the amount of revenue recognized at the time of sales