(m) Provision for environmental measuresThe provision for environmental measures is estimated and recorded to provide for future potential costs, such as costs related to removal and disposal of toxic substances based on related legal requirements.(n) Accounting for consumption taxesTransactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.(o) Cash and cash equivalentsCash and cash equivalents are composed of cash and time deposits having maturities within three months from acquisition, all of which are low-risk, short-term financial instruments readily convertible into cash.(p) Research and development costsResearch and development costs are charged to income when incurred.(q) Income taxesDeferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse.(r) Shareholders’ equityThe Corporation Law of Japan provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the common stock account. Such distributions can be made at any time by resolution of the shareholders or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve is available for distributions.(s) Hedge accounting(1) Hedge accounting method (t) Accounting standards issued but not yet applied• Accounting Standard for Revenue Recognition (ASBJ Statement The exceptional accounting treatment (the “Tokurei-shori”) is applied with respect to interest rate swaps that meet the require-ments to hedge the cash flow volatility of certain foreign currency- denominated loans. The Tokurei-shori and the designated hedge accounting (the “Furiate-shori”) are applied with respect to interest rate and currency swaps that meet the requirements to hedge the cash flow volatility caused by foreign exchange rate fluctuations on certain foreign currency-denominated loans.(2) Hedging instruments and hedged items (3) Hedging policy Hedging instruments .....Interest rate swaps Hedging items ................Foreign currency-denominated loansHedging instruments .....Interest rate and currency swaps Hedging items ................Foreign currency-denominated loans In accordance with the internal regulation, risk of fluctuations in interest rates and foreign exchange is hedged.(4) Method of evaluating the effectiveness of hedges The evaluation of effectiveness is omitted for interest rate swaps accounted for under the Tokurei-shori and for interest rate and currency swaps accounted for under the Tokurei-shori and Furiate-shori.No. 29, revised on March 31, 2020)• Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, revised on March 26, 2021)(1) Overview This is a comprehensive accounting standard for revenue recognition. Revenue is recognized using the following five steps.Step 1: Identify the contract with a customer.Step 2: Identify the separate performance obligations in the contract.Step 3: Determine the transaction price.Step 4: Allocate the transaction price to the separate performance obligations in the contract.Step 5: Recognize revenue when the entity satisfies a performance obligation.(2) Application schedule These accounting standards will be adopted from the beginning of the year ending March 31, 2022.(3) Effect of application The amount of the impact was still being assessed when these consolidated financial statements were prepared.• Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30 issued on July 4, 2019)• Accounting Standard for Financial Instruments (ASBJ Statement No. 10 revised on July 4, 2019)• Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31 issued on July 4, 2019)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19 revised on March 31, 2020)(1) Overview To improve comparability with International accounting standards, “Accounting Standard for Fair Value Measurement” and “Implementation Guidance on Accounting Standard for Fair Value Measurement” (hereinafter referred to as “Accounting Standards for Fair Value Measurement”) were developed and provided guidance such as how to calculate the market value. Accounting standards for fair value measurement are applied to the market prices of the following items:• Financial instruments under “Accounting Standard for Financial Instruments”• Inventories held for sales and trading purposes under “Accounting Standard for Measurement of Inventories”In addition, the “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” has been revised, and notes such as a breakdown by level of the fair value of financial instru-ments have been established.(2) Application schedule These accounting standards will be adopted from the beginning of the year ending March 31, 2022.(3) Effect of application The amount of the impact was still being assessed when these consolidated financial statements were prepared.• Foreign subsidiariesStandard/InterpretationASU 2020-05 “Lease”(u) Additional informationRegarding the impact of the New Coronavirus infection (COVID-19) in the future, The LINTEC Group (hereinafter the “Group”) makes its accounting estimates of impairment of non-current assets and of the collectability of deferred tax assets based on the assumption that our business activity will recover gradually throughout the year ending March 31, 2022 due to the progress of vaccination and the effects of economic measures in each country.Note: The amount of impact was still being assessed when these consolidatedfinancial statements were prepared.OverviewRevision to accounting treatment for leaseApplication scheduleFrom the fiscal year ending March 31, 202282
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