Changes in the Recognition of Agent Transactions and Return Transactions Following the Adoption of the Accounting Standard for Revenue Recognition

「As a result, compared with before the adoption of the Revenue Recognition Accounting Standard and related standards, the consolidated balance sheet for the current consolidated fiscal year shows an ¥8,377 million increase in “Other” under current assets, a ¥598 million decrease in “Provision for returns” under current liabilities and an ¥8,981 million increase in “Other” under current liabilities. On the consolidated statement of income for the current consolidated fiscal year, net sales decreased by ¥31,716 million, cost of sales decreased by ¥31,778 million and selling, general and administrative expenses decreased by ¥53 million, while operating income, ordinary income and profit before income taxes increased by ¥115 million each.」

「The main changes resulting from the adoption of the Revenue Recognition Accounting Standard and related standards are as follows. 1. Revenue recognition for agent transactions: For revenue from certain direct shipments, revenue was previously recognized at the gross amount of consideration received from customers. After assessing the Company’s role in providing goods or services to customers, as principal or agent, the method was changed to recognize revenue at the net amount after deducting payments to suppliers from the gross amount. 2. Sales with a right of return: For sales with a right of return, a provision for returns was previously recognized based on the equivalent amount of gross profit. The method was changed so that revenue is not recognized at the time of sale for goods or products expected to be returned, in accordance with the requirements for variable consideration, and a refund liability is recognized at the amount of consideration received or receivable for those goods or products.」

「From the beginning of the first quarter of the current consolidated fiscal year, we adopted the “Accounting Standard for Revenue Recognition” (Accounting Standard No. 29, 31 March 2020; hereinafter, the “Revenue Recognition Accounting Standard”) and related standards. Revenue is recognized at the amount expected to be received in exchange for the promised goods or services when control of those goods or services is transferred to the customer.」