Risk of Deferred Tax Assets Becoming Unrecoverable Due to Deteriorating Business Performance

「The recoverability of deferred tax assets is assessed based on a reasonable estimate of future taxable income. This accounting estimate is based primarily on expected taxable income for the following fiscal year and beyond, including earnings forecasts.」

「The Group calculates deferred tax assets based on various forecasts and assumptions, including future taxable income, while periodically analysing variances between forecasts and actual results for the Group as a whole and monitoring performance trends. However, because it is difficult to objectively predict the impact on the future earnings of the Company and its consolidated subsidiaries, if the recovery in performance takes substantially longer than assumed above, deferred tax assets may need to be written down, which could affect the Group's performance.」

「Regarding the impact on business performance from the spread of COVID-19, we expect it will take longer than initially anticipated for performance to recover to levels comparable to prior fiscal years. Accordingly, we have assumed that the impact on business performance will continue for the next several years and have made our accounting estimates on that basis. There have been no material changes from the previous fiscal year in the assumptions used for the accounting estimates for the nine-month period ended [current period].」

「Regarding the impact on performance of the spread of COVID-19, the company expects recovery to the level of previous fiscal years to take longer than initially assumed and has therefore assumed that the impact on performance will continue for the next several years, on which basis it has made its accounting estimates. It also states that there have been no material changes from the previous fiscal year in the assumptions used for accounting estimates during the second-quarter consolidated cumulative period.」

「Regarding the impact on performance of the spread of COVID-19, the company expects recovery to the level of previous fiscal years to take longer than initially assumed and has therefore assumed that the impact on performance will continue for the next several years, on which basis it has made its accounting estimates. It also states that there have been no material changes from the previous fiscal year in the assumptions used for accounting estimates during the first-quarter consolidated cumulative period.」

「Regarding the impact on performance of the spread of COVID-19, the company had assumed through the previous fiscal year that the impact would largely subside during the fiscal year ending March 2021. However, after considering the recovery in sales during the fiscal year under review, it expected that recovery to the level of previous fiscal years would take longer than initially assumed. Accordingly, it assumed that the impact on performance would continue for the next several years and reversed deferred tax assets due to a change in the company classification used to assess their recoverability.」

「During the third-quarter consolidated cumulative period, there were no material changes from the second quarter in the assumptions used for accounting estimates. However, as those assumptions are subject to uncertainty, if a resurgence of infections or other factors from the fourth quarter onward causes the recovery in performance to take longer than assumed, performance for the fiscal year under review could be further affected by impairment of fixed assets and recognition of an allowance for doubtful accounts.」

「Regarding the impact on performance of the spread of COVID-19, the company had assumed through the second quarter that the impact would largely subside during the fiscal year ending March 2021. However, after considering the recovery in sales during the second quarter, it expected that recovery to the level of previous fiscal years would take longer than initially assumed. Accordingly, for the second quarter, it assumed that the impact on performance would continue for the next several years and made its accounting estimates on that basis. As a result, it reversed deferred tax assets due to a change in the company classification used to assess their recoverability at the end of the second quarter and recorded ¥193 million in deferred income taxes.」

「The company assumed that the impact on performance of the spread of COVID-19 would largely subside during the fiscal year ending March 2021 and made accounting estimates, including impairment of fixed assets, recognition of deferred tax assets and provision for allowance for doubtful accounts, based on that assumption. The impact on the consolidated financial statements for the first-quarter consolidated cumulative period was limited. However, as the assumption is subject to uncertainty, if containment of the spread takes significantly longer than expected, performance for the fiscal year under review could be affected by impairment of fixed assets, reversal of deferred tax assets and recognition of an allowance for doubtful accounts.」

「If significant differences arise from the projected taxable income because changes in future market conditions or a sharp deterioration in performance due to the spread of COVID-19 are expected, the company may determine that some or all of its deferred tax assets cannot be recovered and will need to reduce the deferred tax assets.」