Finalizing the loss after the USM withdrawal and addressing the remaining 10% are the key issues

USM acquired 60% of the voting rights on 20 May 2026 and became a consolidated subsidiary. However, during the post-merger integration process and preparation of the first consolidated results, it was discovered that improper accounting practices, centered on round-tripping transactions, had been carried out before the acquisition. The announcement of the interim results was consequently postponed, as additional time was required for the investigation and audit response. The first point to confirm in the next results is how far the investigation into the pre-acquisition period has progressed and whether any further adjustments to the consolidated financial statements remain.

A ¥6,759 million impairment loss was recognized on USM goodwill for the interim period, resulting in a consolidated operating loss of ¥4,500 million and an interim loss attributable to owners of the parent of ¥5,473 million. As the impairment loss exceeds the operating loss, its impact on earnings is substantial. However, based on the disclosures currently available, it is not possible to determine whether the issues relating to USM ended with the impairment charge or whether adjustments to liabilities, receivables and transaction balances, or additional costs, will arise.

The company decided to transfer 60% of USM's shares and completed the transfer of 50% as of 17 September 2026. The remaining 10% is scheduled to be transferred between mid-September 2027 and mid-September 2028, but the company has not disclosed that the transfer had been completed as of the next results. The transfer price has not been disclosed, and the gain or loss arising from the transfer and its impact on cash flow are also items requiring confirmation in the next results.

USM was newly consolidated for the interim period, but is expected to be removed from the scope of consolidation after completion of the transfer. Accordingly, the next results should clarify how much of USM's sales and profit will be included in the nine-month cumulative results, whether a gain or loss on disposal arose from deconsolidation, and how the remaining 10% interest will be treated, such as as a financial asset. Unless the existence and amount of any additional off-balance-sheet liabilities relating to USM are disclosed, it will remain difficult to determine whether the loss recognized this time has been finalized.