Impairment of Fixed Assets Due to Declining Profitability

「Because signs of impairment caused by declining profitability emerged in the business-use assets held by the company, we examined their future recoverability. As recoverability was no longer considered likely, we reduced their carrying amounts to their recoverable amounts. As a result, an impairment loss of ¥918 million on production equipment and other assets in the Anti-Vibration Business segment was recorded as an extraordinary loss.」

「Indicators of impairment due to declining profitability were identified in the business assets held by 上海フコク有限公司. After examining future recoverability, the company concluded that recoverability was no longer supportable and reduced the entire carrying amount. As a result, an impairment loss of ¥282 million on production equipment and other assets in the anti-vibration business segment was recorded as a special loss.」

「The company has improved profitability by reflecting transportation costs and increases in raw material prices in product unit prices, and strengthened measures against defective products with support from other sites. Based on estimates of cash flows after these measures, undiscounted future cash flows exceeded the carrying amount, so no impairment loss was recognized.」

「At a meeting of the board of directors of 末吉工業株式会社 held on 23 December 2022, a decision was made to withdraw from an unprofitable business. For assets for which no alternative investment was planned, the carrying amount was reduced to the memorandum value, and the reduction was recorded as a business restructuring loss and a special loss (¥100 million for machinery and equipment, ¥20 million for buildings, and ¥3 million for tools, furniture and fixtures).」

「At the end of the current fiscal year, 末吉工業株式会社, a consolidated subsidiary engaged in the metal processing business, continued to record operating losses due to a delayed recovery in orders following the decline caused by COVID-19 and semiconductor shortages, expansion of unprofitable businesses resulting from delays in raising selling prices, and delays in withdrawing from unprofitable businesses. Although the company recognized indicators of impairment, no impairment loss was recognized because undiscounted future cash flows exceeded the carrying amount.」

「At the end of the current fiscal year, indicators of impairment were identified in the asset group of 末吉工業株式会社, a consolidated subsidiary engaged in the metal processing business, but no impairment loss was recognized because undiscounted future cash flows exceeded the carrying amount.」

「Estimates and judgments concerning impairment of fixed assets and the recoverability of deferred tax assets take into account deteriorating profitability caused by factors including declining orders due to the impact of COVID-19 in Japan and overseas. Initially, the company assumed that the impact would be significant throughout the current consolidated fiscal year, but at present it is making accounting estimates on the assumption that the impact will continue into the following consolidated fiscal year.」

「Estimates and judgments concerning impairment of fixed assets and the recoverability of deferred tax assets take into account deteriorating profitability caused by factors including declining orders due to the impact of COVID-19 in Japan and overseas.」

「Although impairment losses were recorded for the second consecutive fiscal year, in light of the significant impairment losses recorded in the previous fiscal year, the company focused during the current fiscal year on initiatives such as cost reductions and operational improvements, and their effects were gradually becoming apparent. However, these efforts were insufficient to absorb the expected decline in orders caused by the sudden outbreak of an infectious disease, resulting in the recording of impairment losses for a second consecutive fiscal year.」

「As a result, impairment losses of ¥3,491 million on production equipment and other assets in the Functional Products business segment and ¥136 million on production equipment and other assets in the New Business segment were recorded as special losses.」

「As the recoverability of the new-business production equipment held by the company was no longer considered supportable due to declining profitability, its carrying amount was reduced to the memorandum value, and the reduction was recorded as an impairment loss and a special loss (¥69 million for machinery and equipment, ¥30 million for tools, furniture and fixtures, and ¥6 million for software).」