Risk of fluctuations in the value of aircraft and containers held for portfolio composition and valuation losses

「Leasing fund business　　　　　　　　 51,940　　33,610　　△18,329 Equity investment products　　　　　 51,940　　22,080　　△29,860 Trust assets (aircraft held for origination)　－　11,530　11,530」

「In addition, the Group acquired aircraft held for sale through AMENTUM ALPHA LIMITED, which became a consolidated subsidiary during the interim consolidated accounting period.」

「The cash trust holding aircraft for arrangement decreased from the end of the previous fiscal year as sales progressed steadily.」

「This was mainly because, as in the previous fiscal year, an impairment loss of ¥1,695 million was recognized on monetary trusts (aircraft for arrangement) (¥1,217 million in the previous fiscal year).」

「Although the company recognised an impairment loss of ¥1,217 million on a monetary trust related to aircraft held for project formation during the current consolidated fiscal year,」

「Regarding current conditions, economic and social activity is generally moving toward normalisation as a result of policies implemented by governments in various countries and the efforts of individual companies. The company expects its results to recover to pre-pandemic levels as a result of various measures and has determined that the impact of COVID-19 is limited for purposes of its accounting estimates.」

「The aircraft's net realisable value is defined as the net loan balance representing the Group's repayment obligation, and changes in the resulting valuation amount are recognised in non-operating income or expenses as either gain on reversal of impairment loss on supplies or impairment loss on supplies.」

「In response, from the current second-quarter consolidated accounting period, the company changed the purpose of holding the aircraft to reflect the substance of the arrangement, on the basis that the proceeds from the sale of the aircraft were likely to be used to repay the non-recourse loan. The aircraft are recognised as supplies under current assets. For valuation purposes, the company applies by analogy the Accounting Standard for Measurement of Inventories. The aircraft's net realisable value is defined as the net loan balance representing the Group's repayment obligation, and changes in the resulting valuation amount are recognised in non-operating income or expenses as either gain on reversal of impairment loss on supplies or impairment loss on supplies.」

「Cost of sales was ¥1,152 million, up 73.6% year on year, partly because the company recognised a ¥490 million impairment loss on aircraft held for sale related to the AML project.」

「The company newly recognised an impairment loss of ¥1,574,420 thousand on aircraft held for sale in cost of sales.」

「The Group recognises aircraft held for sale on the consolidated balance sheet at their underlying value. If the underlying value of these aircraft fluctuates, the Group's results may be affected through the recognition of impairment losses.」

「The company recognised the income or loss from the lease business incurred up to that point and impairment losses on aircraft as impairment losses on investments in products and recorded them in cost of sales. It also included the subsidiary within the scope of consolidation as of the end of March and reflected the assets and liabilities related to the lease business as of the end of March 2020 in the consolidated financial statements.」

「To form operating lease projects, the Group may acquire aircraft for use in project formation and recognise them on the consolidated balance sheet. These assets are expected to be transferred to investors and others within a short period after acquisition. However, if the economic environment changes rapidly or the assets cannot be transferred as initially expected, their value may fluctuate, potentially affecting the Group's results through the recognition of impairment losses.」

「To form operating lease projects, the Group may acquire aircraft and containers for maritime transport for use in project formation and recognise them on the consolidated balance sheet. These assets are expected to be transferred to investors and others within a short period after acquisition. However, if the economic environment changes rapidly or the assets cannot be transferred as initially expected, their value may fluctuate, potentially affecting the Group's results through the recognition of impairment losses.」