Notes to Consolidated Financial Statements
30. First-time Adoption of IFRS
On November 18, 2014, the Company was investigated by the Japan Fair Trade Commission in respect of alleged antitrust violations relating to a tender for digital radio communication systems for ire departments.
The Company has fully cooperated with the relevant authorities.
Not applicable.
The accompanying consolidated inancial statements are the Group’s irst consolidated inancial statements prepared in accordance with IFRS. The accounting policies applied in preparing the irst IFRS inancial statements are described in note (3) Summary of signiicant accounting policies.
On the transition to IFRS, the Group’s opening consolidated statements of inancial position was prepared in accordance with IFRS 1 as of April 1, 2013, the transition date to IFRS, with required adjustments made to the consolidated balance sheet as of April 1, 2013 which had been prepared in accordance with Japanese GAAP. The Group has applied the following transition elections, and the efects of transition to IFRS are presented below.
a. IFRS 1 Exemptions
IFRS 1 requires the retrospective application of IFRS for companies adopting IFRS for the irst time, however certain exemptions are available. The Group has applied the following exemptions permitted by IFRS 1. The Group has adopted the exemption for the following items. The efects of applying IFRS 1 are adjusted in retained earnings or other components of equity.
・Business Combinations
The Group has elected not to apply IFRS 3 “Business Combinations” retrospectively to business combinations which occurred prior to April 1, 2013. Therefore, the carrying amounts of goodwill from acquisitions prior to April 1, 2013 are based on Japanese GAAP.
・Foreign Currency Translation Adjustments
Cumulative foreign currency translation adjustments are deemed to be zero as of the transition date.
・Designation of Financial Instruments Recognized prior to Transition Date
The Group has elected to use facts and circumstances that existed as of the transition date in applying the classiication standard under IFRS 9 (issued in November 2009, amended in October 2010). Except for a part, the Group measures inancial assets at fair value through other comprehensive income (FVTOCI).
b. IFRS 1 Mandatory Exceptions
IFRS 1 prohibits retrospective application of IFRS with respect to “accounting estimates,” “derecognition of inancial assets and liabilities,” “hedge accounting,” and “non-controlling interests." The Group has accordingly applied the relevant IFRSs to these transactions prospectively from the transition date.
b. Compensation for Directors and Executive Oicers of the Company
Millions of Yen
2015 2014
Monthly salary, year-end allowance and performance-linked compensation ………… ¥520 ¥519
c. Reconciliation of IFRS and Japanese GAAP and Related Notes (1) Reconciliation of Equity as of the Transition Date (April 1, 2013)
Millions of Yen Accounts under Japanese GAAP Japanese
GAAP Reclassiication
Diferences in recognition and
measurement IFRS Notes Accounts under IFRS
Assets Assets
Current assets Current assets
Cash and deposits ……… ¥ 9,278 ¥37,876 ¥ 259 ¥ 47,413 Cash and cash equivalents Deposits with Hitachi Group …… 37,976 (37,976)
Notes and accounts
receivable - trade ……… 41,642 1,310 (475) 42,477 (A) Trade and other receivables Inventories ……… 26,351 406 26,757 (A) Inventories
Deferred tax assets ………… 5,079 (5,079)
Other ……… 2,901 (1,450) 10 1,461 Other current assets Allowance for doubtful accounts … (118) 118
Total current assets ……… 123,109 (5,201) 200 118,108 Total current assets
Long-term assets Non-current assets
Property, plant and equipment … 20,542 (1,533) (48) 18,961 Property, plant and equipment Intangible assets ……… 2,892 2,892 Intangible assets
Investment securities ………… 1,568 (1,568) Long-term loans receivable … 103 (103)
3,181 4,795 7,976 (B) Other inancial assets Deferred tax assets ……… 1,905 5,079 (5,143) 1,841 (C) Deferred tax assets Other ……… 2,700 (176) 2,524 Other non-current assets Allowance for doubtful accounts … (299) 299
Total long-term assets ……… 29,411 5,179 (396) 34,194 Total non-current assets Total assets……… ¥152,520 ¥ (22) ¥ (196) ¥152,302 Total assets
63
Annual Report 2015 Millions of Yen
Accounts under Japanese GAAP Japanese
GAAP Reclassiication Diferences in recognition and
measurement
IFRS Notes Accounts under IFRS
Liabilities Liabilities
Current liabilities Current liabilities
Short-term loans payable …… ¥ 551 ¥ 551 Short-term debt
Notes and accounts payable - trade … 24,970 ¥4,574 ¥ 12 29,556 Trade and other payables Accrued expenses ……… 10,908 611 11,519 (D) Accrued expenses
424 (1) 423 Other inancial liabilities Income tax payable ……… 870 870 Income tax payable Advances received ……… 3,610 3,610 Advances received Provision for product warranties … 1,101 (1,101)
Provision for loss on
construction contracts ……… 22 (22)
1,160 1,160 Provisions
Other ……… 5,278 (5,057) 221 Other current liabilities Total current liabilities ………… 47,310 (22) 622 47,910 Total current liabilities
Long-term liabilities Non-current liabilities
Long-term debt ……… 165 165 Long-term debt
Provision for retirement beneits 18,001 12,547 30,548 (E) Retirement and severance beneits Provision for directors'
retirement beneits ……… 113 (113) Asset retirement obligations … 79 (79)
79 79 Provisions
Deferred tax liabilities ………… 229 (8) 221 Deferred tax liabilities Other ……… 1,461 113 1,574 Other non-current liabilities Total long-term liabilities …… 20,048 0 12,539 32,587 Total non-current liabilities Total liabilities ……… 67,358 (22) 13,161 80,497 Total liabilities
Net assets Equity
Common stock ……… 10,058 10,058 Common stock
Capital surplus ……… 26,202 26,202 Capital surplus Retained earnings ……… 48,118 (17,164) 30,954 (G) Retained earnings Total accumulated other
comprehensive income …… (478) 3,890 3,412 (B), (F) Other components of equity Treasury stock, at cost ……… (2,617) (2,617) Treasury stock, at cost
68,008
Total equity attributable to owners of the parent Minority interests ……… 3,880 (83) 3,797 Non-controlling interests Total net assets ……… 85,162 (13,357) 71,805 Total equity
Total liabilities and net assets …… ¥152,520 ¥ (22) ¥(196) ¥152,302 Total liabilities and equity
Notes to Reconciliations of Equity as of the Transition Date (April 1, 2013) (A) Adjustment to trade and other receivables and inventories
Under Japanese GAAP, the Group recognized income for sale of goods at the time of shipping; however, under IFRS, the Group recognizes such income at the time of the transfer of the signiicant risks and rewards of with ownership.
(B) Adjustment to other inancial assets and other component of equity
Under Japanese GAAP, the Group stated securities without market price (unlisted stocks) at cost determined by the moving-average method; however, under IFRS, the Group states them at cost determined by fair value and recognizes the diference between acquisition cost as other comprehensive income.
(C) Adjustment to deferred tax assets
The amount of deferred tax assets decreased; the main reason is that the Company and its domestic subsidiaries re-assessed retrievability of deferred tax assets under IFRS.
(D) Adjustment to accrued expenses
The Group recognizes unused paid vacation in liabilities under IFRSs, which was not required under Japanese GAAP.
(E) Adjustment to retirement and severance beneits
Under Japanese GAAP, actuarial gains or losses and prior service cost were amortized on a straight-line basis over a certain number of years set within the employees’ average remaining service period. Under IFRSs, the actuarial gains or losses and prior service cost are recognized in other comprehensive income when occurred.
The prior service cost as recognized in proit or loss when occurred. Further, in determining the amounts of retirement beneit obligations and service cost, the Group changed its method to attribute beneits to periods of service from the straight-line basis to the beneit formula basis and recognises the diferences in retained earnings.
Unrecognized actuarial diferences and unrecognized past service costs are reclassiied entirely to retained earnings for the IFRS transition
(F) Adjustment to other components of equity
The Group applied the exemption prescribed in IFRS 1 and transferred all cumulative exchange diferences on translation of foreign operations to retained earnings on the date of transition April 1, 2013.
(G) Transition efect on retained earnings
Millions of Yen April 1, 2013 Adjustment to trade and other receivables and inventories (refer to (A)) ……… ¥ 106 Adjustment to deferred tax assets (refer to (C)) ……… 3,515 Adjustment to accrued expenses (refer to (D)) ……… 579 Adjustment to retirement and severance beneits (refer to (E)) ……… 12,548 Adjustment to other components of equity (refer to (F))……… 685
Other ……… (269)
Total ……… ¥17,164
65
Annual Report 2015
(H) Reclassiications
The Group makes reclassiications to comply with the provisions of IFRS. The major reclassiications are as follows:
・“Deposits with Hitachi, Ltd.” are stated in “Cash and cash equivalents.”
・All current portions of deferred tax assets are reclassiied to non-current assets.
・Accounts payable-other was stated in “Other (current liabilities)” under Japanese GAAP; however under IFRS the Company reclassiied it to “Trade and other payables.”
(2) Reconciliation of Equity as of March 31, 2014
Millions of Yen Accounts under Japanese GAAP Japanese
GAAP Reclassiication
Diferences in recognition and
measurement IFRS Notes Accounts under IFRS
Assets Assets
Current assets Current assets
Cash and deposits ……… ¥ 14,807 ¥42,340 ¥ 2 ¥ 57,149 Cash and cash equivalents Deposits with Hitachi Group … 42,812 (42,812)
Notes and accounts receivable - trade … 54,957 2,137 (2,585) 54,509 (A) Trade and other receivables 472 0 472 Other inancial assets Inventories ……… 34,812 2,003 36,815 (A) Inventories
Deferred tax assets ……… 6,973 (6,973)
Other ……… 3,660 (2,371) 19 1,308 Other current assets Allowance for doubtful accounts (213) 213
Total current assets ……… 157,808 (6,994) (561) 150,253 Total current assets
Long-term assets Non-current assets
Property, plant and equipment … 24,264 (1,542) (50) 22,672 Property, plant and equipment Intangible assets ……… 1,339 338 1,677 (B) Intangible assets
Investment securities ………… 1,533 (1,533) Long-term loans receivable … 66 (66)
2,927 4,714 7,641 (C) Other inancial assets Deferred tax assets ……… 1,020 6,973 (5,356) 2,637 (D) Deferred tax assets Other ……… 2,424 (157) 2,267 Other non-current assets Allowance for doubtful accounts … (371) 371
Total long-term assets ………… 30,275 6,973 (354) 36,894 Total non-current assets Total assets……… ¥188,083 ¥ (21) ¥ (915) ¥187,147 Total assets
Millions of Yen Accounts under Japanese GAAP Japanese
GAAP Reclassiication
Diferences in recognition and
measurement IFRS Notes Accounts under IFRS
Liabilities Liabilities
Current liabilities Current liabilities
Short-term loans payable …… ¥ 424 ¥ 424 Short-term debt
Notes and accounts payable - trade … 40,213 4,190 (120) 44,283 Trade and other payables Accrued expenses ……… 9,604 608 10,212 (E) Accrued expenses
338 338 Other inancial liabilities Income tax payable ……… 1,276 1,276 Income tax payable Advances received ……… 10,673 10,673 Advances received Provision for product warranties 1,501 (1,501)
Provision for loss on
construction contracts ……… 51 (51)
1,531 1,531 Provisions
Other ……… 4,804 (4,528) 276 Other current liabilities Total current liabilities ………… 68,546 (21) 488 69,013 Total current liabilities
Long-term liabilities Non-current liabilities
Long-term debt ……… 111 111 Long-term debt
Provision for retirement beneits … 27,589 27,589 Retirement and severance beneits Provision for directors'
retirement beneits ……… 98 (98) Asset retirement obligations … 66 (66)
66 66 Provisions
Deferred tax liabilities ………… 349 (347) 2 Deferred tax liabilities Other ……… 223 98 321 Other non-current liabilities Total long-term liabilities …… 28,436 0 (347) 28,089 Total non-current liabilities Total liabilities ……… 96,982 (21) 141 97,102 Total liabilities
Net assets Equity
Common stock ……… 10,058 10,058 Common stock
Capital surplus ……… 26,202 26,202 Capital surplus Retained earnings ……… 57,867 (12,860) 45,007 (G) Retained earnings Total accumulated other
comprehensive income ……… (5,295) 11,731 6,436 (C), (F) Other components of owner's equity
Treasury stock, at cost ……… (2,661) (2,661) Treasury stock, at cost 85,042 Total equity attributable to
owners of the parent Minority interests ……… 4,930 73 5,003 Non-controlling interests Total net assets ……… 91,101 (1,056) 90,045 Total equity
Total liabilities and net assets …… ¥188,083 ¥(21) ¥(915) ¥187,147 Total liabilities and equity
67
Annual Report 2015
Notes to Reconciliations of Equity as of March 31, 2014
(A) Adjustment to trade and other receivables and inventories
Under Japanese GAAP, the Group recognized income for sale of goods at the time of shipping; however, under IFRS, the Group recognizes such income at the time of the transfer of the signiicant risks and economic value associated with ownership.
(B) Adjustment to intangible assets
Under JGAAP, the Group amortized goodwill over the years estimated; goodwill is not amortized under IFRS.
(C) Adjustment to other inancial assets and other component of owner's equity
Under Japanese GAAP, the Group stated securities without market price (unlisted stocks) at cost determined by the moving-average method; however, under IFRS, the Group states them at cost determined by fair value and recognizes the diference between acquisition cost as other comprehensive income.
(D) Adjustment to deferred tax assets
The amount of deferred tax assets decreased; the main reason is that the Company and its domestic subsidiaries re-assessed retrievability of deferred tax assets under IFRS.
(E) Adjustment to accrued expenses
The Group recognizes unused paid vacation in liabilities under IFRSs, which was not required under Japanese GAAP.
(F) Adjustment to other components of equity
The Group applied the exemption prescribed in IFRS 1 and transferred all of cumulative exchange diferences on translation of foreign operations to retained earnings on the date of transition (April 1, 2013).
Under Japanese GAAP, the amount of remeasurement of deined beneit pension plan is fully recognised in other comprehensive income when it occurs and amortised and reclassiied to proit or loss over a certain period.
However Under IFRSs, it is fully recognised in other comprehensive income when it occurs and not reclassiied to proit or loss.
Unrecognized actuarial diferences and unrecognized past service costs are reclassiied entirely to retained earnings for the IFRS transition.
(G) Transition efect on retained earnings
Millions of Yen March 31, 2014 Adjustment to trade and other receivables and inventories (refer to (A)) ……… ¥ 629 Adjustment to intangible assets (refer to (B)) ……… (320) Adjustment to deferred tax assets (refer to (D)) ……… 3,291 Adjustment to accrued expenses (refer to (E)) ……… 607 Adjustment to other components of equity (refer to (F))……… 8,800
Other ……… (147)
Total ……… ¥12,860 (H) Reclassiications
The Group makes reclassiications to comply with provisions of IFRS. The major reclassiications are as follows:
・"Deposits with Hitachi, Ltd." are stated in "Cash and cash equivalents."
・All current portions of deferred tax assets are reclassiied to non-current assets.
・Accounts payable-other was stated in "Other (current liabilities)" under Japanese GAAP; however under IFRS the Company reclassiied to "Trade and other payables."
(3) Reconciliation of proit or loss and comprehensive income (For the year ended March 31, 2014) Consolidated statement of proit or loss
Millions of Yen Accounts under Japanese GAAP Japanese
GAAP Reclassiication Diferences in recognition and
measurement
IFRS Notes Accounts under IFRS Net sales ……… ¥167,365 ¥(2,038) ¥165,327 (A) Revenues
Cost of sales ……… (116,496) 1,711 (114,785) (A) Cost of sales
Gross proit ……… 50,869 (327) 50,542 Gross proit
Selling, general and administrative expenses (33,893) 570 (33,323) (B) Selling, general and administrative expenses
3,201 8 3,209 Other income
(3,140) (180) (3,320) Other expenses Operating income ……… 16,976 61 71 17,108 Operating income
698 (155) 543 Financial income
(27) (43) (70) Financial expenses Non-operating income ……… 979 (979)
Non-operating expenses ………… (561) 561 Extraordinary income ……… 2,920 (2,920) Extraordinary losses ……… (2,606) 2,606 Income before income taxes and
minority interests ……… 17,708 (127) 17,581 Income before income taxes
Total income taxes ……… (1,609) 507 (1,102) Income taxes
Income before minority interests 16,099 380 16,479 Net income
Net income attributable to:
Net income ……… 15,326 266 15,592 Owners of the parent Minority interests in income ……… ¥ 773 ¥ 114 ¥ 887 Non-controlling interests
69
Annual Report 2015
Consolidated statement of comprehensive income
Notes to Reconciliations of proit or loss and Comprehensive income for the year ended March 31, 2014 (A) Adjustment to revenues
Under Japanese GAAP, the Group recognized income for sale of goods at the time of shipping; however, under IFRS, the Group recognizes such income at the time of the transfer of the signiicant risks and rewards of with ownership.
(B) Selling, general and administrative expenses
Under JGAAP, the Group amortized goodwill over the years estimated; goodwill is not amortized under IFRS.
(C) Reclassiications
The Group makes reclassiications to comply with the provisions of IFRS. The major reclassiications are as follows:
・Under Japanese GAAP, "Interest income," "Dividend income," "Foreign exchange gains" were presented separately;
however under IFRS, these items and income related to inance assets included in "Other" are included on
"Finance income." Under Japanese GAAP, "Interest expenses" are presented separately; however under IFRS this item and expenses related to inance assets included in "Other" are included in "Finance expenses."
・Under Japanese GAAP, "Rent income" and "Subsidy income" were presented separately in "Non-operating income"; however, under IFRS these items and "Other" excluding income related to inance assets are included in "Other income." Under Japanese GAAP, "Loss on disposal of non-current assets," "Maintenance cost for idle assets" and "Penalty" were presented separately in "Non-operating expenses"; however, under IFRS these items and "Other" excluding loss related to inance assets are included in "Other expenses."
・Under Japanese GAAP, "Gain on sales of property, plant and equipment" were presented separately in
"Extraordinary income"; however, under IFRS this item is included in "Other income."
Millions of Yen Accounts under Japanese GAAP Japanese
GAAP Reclassiication
Diferences in recognition and
measurement IFRS Notes Accounts under IFRS Income before minority interests … ¥16,099 ¥380 ¥16,479 Net income
Other comprehensive income (OCI) Other comprehensive income (OCI) Items not to be reclassiied into net income Unrealized gain on
for- sales securities ……… 35 30 65 Net changes in inancial assets measured at fair value through OCI Remeasurements of deined
beneit plans ……… 1,808 150 1,958
Remeasurements of deined beneit plans
180 2,023 Total items not to be reclassiied into net income
Items that can be reclassiied into net income
Foreign currency translation
adjustments ……… 1,638 (41) 1,597 Foreign currency translation adjustments
(41) 1,597
Total items that can be reclassiied into net income Total other comprehensive
income ……… 3,481 139 3,620 Other comprehensive income (OCI) Comprehensive income ……… 19,580 519 20,099 Comprehensive income
Comprehensive income attributable to:
Shareholders of Hitachi Kokusai
Electric Inc. ……… 18,239 483 18,722 Owners of the parent Minority interests ……… ¥ 1,341 ¥ 36 ¥ 1,377 Non-controlling interests
・Under JGAAP "Business structure improvement expenses," "Loss on sales of property, plant and equipment" and
"impairment of goodwill" were presented separately in "Extraordinary losses"; however, under IFRS, these items are included in "Other expenses."
(4) Reconciliations of Cash Flows (Fiscal year ended March 31, 2014)
There are no material diferences between the consolidated statements of cash lows disclosed in accordance with Japanese GAAP and the consolidated statements of cash lows that disclosed in accordance with IFRS.