Change in Revenue Recognition Method Due to the Application of the Revenue Recognition Accounting Standard and Other Standards

「As a result, operating revenue for the current second-quarter consolidated cumulative period decreased by ¥66.377 million compared with the previous accounting treatment, while operating income, ordinary income, and pretax quarterly net income each increased by ¥736 thousand. The beginning balance of retained earnings also decreased by ¥10.989 million.」

「The Company applied the Accounting Standard for Revenue Recognition (Accounting Standards Board of Japan Statement No. 29, 31 March 2020; hereinafter, the “Revenue Recognition Standard”) and other relevant standards from the beginning of the first quarter of the current consolidated fiscal year. Revenue is now recognized at the amount expected to be received in exchange for promised goods or services when control of those goods or services is transferred to the customer. Among transactions for which the total consideration received from customers had been recognized as revenue, transactions determined to involve the Company acting as an agent in providing services to customers are now recognized on a net basis, after deducting amounts paid to subcontractors from the consideration received from customers. Franchise joining fee revenue, which was previously recognized at a point in time, is now recognized over a specified period. As a result, operating revenue for the current first-quarter consolidated cumulative period decreased by ¥18.050 million compared with the previous accounting treatment, while operating loss, ordinary loss, and pretax quarterly net loss each decreased by ¥569 thousand.」