(20)when an increase in the fulfillment cash flows exceeds the carrying amount of the CSM, the CSM is reduced to zero and the excess is recognized as insurance service expenses and such excess is recorded as a loss component of the liability for the remaining coverage; when the CSM is zero, changes in the fulfillment cash flows adjust the loss component within the liability for remaining coverage with correspondence to insurance service expenses; and
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES the excess of any decrease in the fulfillment cash flows over the loss component reduces the loss component to zero and reinstates the CSM. When a loss component exists, Sony allocates the following items between the loss component and the remaining component of the liability for the remaining coverage for the respective group of insurance contracts, based on the ratio of the loss component to the fulfillment cash flows relating to the expected future cash outflows: | (1) | expected incurred claims and expenses for the period; |
| (2) | changes in the risk adjustment fornon-financial risk for the risk expired; and |
| (3) | finance income (expenses) from insurance contracts issued. |
The amounts of loss component allocation in (1) and (2) above reduce the respective components of insurance revenue and are reflected in insurance service expenses. For certain insurance contracts in a group with a coverage period of one year or less at initial recognition, Sony uses the PAA to simplify the measurement of the group of insurance contracts. Under the PAA, on initial recognition of each group of insurance contracts, the carrying amount of the liability for remaining coverage is measured at the premiums received on initial recognition, minus any insurance acquisition cash flows allocated to the group at the date of the receipt of the premiums. Sony amortizes insurance acquisition cash flows over the coverage period of the group of insurance contracts. Subsequently, the carrying amount of the liability for remaining coverage is increased by any premiums received and the amortization of insurance acquisition cash flows recognized as expenses, and decreased by the amount recognized as insurance revenue for services provided and any additional insurance acquisition cash flows allocated after initial recognition. Portfolios of insurance contracts that are assets and those that are liabilities are presented separately in the consolidated statements of financial position. If no insured event has occurred and the surrender option has not been exercised as of the reporting date, the insurance contract liabilities are classified asnon-current liabilities. However, if an insured event occurs or the surrender option is exercised, Sony loses its rights to postpone the payment of these liabilities. In this case, the insurance contract liabilities are classified as current liabilities, as they are due to be settled within 12 months after the end of the reporting period. Sony disaggregates amounts recognized in the consolidated statements of income and the consolidated statements of comprehensive income into an insurance service result, which is comprised of insurance revenue and insurance service expenses, and insurance finance income or expenses. Sony does not disaggregate changes in the risk adjustment fornon-financial risk between the insurance service result and insurance finance income or expenses and includes them in the insurance service result. Insurance revenue excludes any investment components and is recognized as follows: | (1) | Contracts not measured under the PAA |
Sony recognizes insurance revenue as it provides insurance contract services. For contracts not measured under the PAA, the insurance revenue relating to services provided for each period represents the total of the changes in the liability for remaining coverage that relate to services for which Sony expects to receive consideration, and primarily comprises the following items: a release of the CSM, measured based on coverage units provided during the fiscal year;
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES changes in the risk adjustment fornon-financial risk relating to current services; claims and other insurance service expenses incurred during the year, measured at the amounts expected at the beginning of the fiscal year; and allocation of the amount of insurance acquisition cash flows in a systematic way based on the passage of time. The release amount of the CSM of a group of insurance contracts that is recognized as insurance revenue in each fiscal year is determined by identifying the coverage units in the group and recognizing in profit or loss the amount of the CSM allocated to the coverage units provided during the fiscal year. The number of coverage units is the quantity of services provided based on the insurance contracts in the group, determined by considering the quantity of benefits to be provided by each insurance contract in the group and the expected coverage period. Services provided based on insurance contracts include insurance coverage and, for all direct participating contracts, investment related services for managing underlying items on behalf of policyholders. Insurance contracts other than direct participating contracts include investment return services for generating an investment return for the policyholder. | (2) | Contracts measured under the PAA |
For contracts measured under the PAA, the insurance revenue for each period is the amount of expected premium receipts for providing services during the period. Sony allocates the expected premium receipts to each period based mainly on the passage of time. | Financial services expenses - | (b) | Insurance service expenses |
Insurance service expenses arising from insurance contracts comprise the following items: | (1) | incurred claims and benefits excluding investment components and reduced by the loss component allocation; |
| (2) | other incurred and directly attributable insurance service expenses (reduced by the loss component allocation); |
| (3) | amortization of insurance acquisition cash flows; |
| (4) | changes that relate to past services (e.g., changes in the fulfillment cash flows relating to the liability for incurred claims; and |
| (5) | changes that relate to future services (e.g., losses on onerous insurance contracts and reversal of those losses arising from changes in the loss components). |
For contracts not measured under the PAA, amortization of insurance acquisition cash flows is reflected in insurance service expenses in the same amount as insurance acquisition cash flows recovery reflected within insurance revenue as described above. | (c) | Insurance finance income and expenses |
Insurance finance income and expenses comprise changes in the carrying amounts of groups of insurance contracts arising from the effects of the time value of money, financial risk and changes therein. Sony has chosen to disaggregate insurance finance income or expenses between profit or loss and other comprehensive income for contracts without direct participation features, excluding certain variable life insurance and individual variable annuity contracts. The amount included in profit or loss is determined by a systematic allocation of the expected total insurance finance income or expenses over the duration of the group of insurance contracts. The amount of systematic allocation is determined using the discount rates determined on initial recognition of the group of insurance contracts. For insurance finance income or expenses arising from the CSM, the discount rates determined on initial recognition of the group of insurance contracts are used. As a result of this systematic allocation, the total amounts recognized in other comprehensive income is equal to zero over the duration of the group of insurance contracts. In addition, the cumulative amount recognized in other comprehensive income at any point in time is the difference between the carrying amount of the group of insurance contracts and the amount measured by this systematic allocation.
SONY GROU P CORPORATION AND CONSOLIDATED SUBSIDIARIES For contracts with direct participation features, the insurance finance income or expenses include changes in the value of underlying items (excluding additional premium payments and withdrawals), all of which are recognized in profit or loss. | Significant judgments and estimates for IFRS 17, which Sony will apply from the fiscal year ending March 31, 2024 |
| i) | Measurement methods and inputs for insurance contracts |
Sony estimates the mortality and morbidity rates based on the most recent actual outcomes and analyzes the historical experience and trends in data using statistical methods. When estimating the mortality and morbidity rates for each group of insurance contracts, Sony takes into account the characteristics of policyholders including gender, health conditions and smoking habits and the characteristics of the group of insurance contracts such as the selective effects over time. The estimates are revised in a timely manner to reflect changes in lifestyle, as well as changes in social conditions such as improvement of mortality and morbidity rates in the future. Sony estimates the lapse and surrender rates based on the most recent actual outcomes and determines the probability-weighted lapse and surrender rates for each group of insurance contracts by analyzing historical experience and trends in data using statistical methods. Lapse and surrender rates are estimated, taking into account both ordinary and dynamic lapses, and reflect the tendency to higher surrender rates when the yield on contracts increases or exceeds the guaranteed minimum for certain insurance contracts. In determining the lapse and surrender rates, historical actual data is considered. If no clear correlation is found in historical actual data, the actual results of similar products as well as domestic and overseas practical trends are used as reference. Sony projects estimates of future expenses based on the current expense levels. The expenses comprise expenses directly attributable to the group of insurance contracts, including the allocation of fixed and variable overhead expenses. In addition, Sony applies inflation adjustments to the estimated claims to be paid in future. | ii) | Discretionary participation features of future cash flows |
For certain participating insurance contracts other than direct participating contracts, the effect of discretionary changes on the fulfillment cash flows is adjusted in the contractual service margin. Although Sony has discretionary participation features related to the investment policy for these contracts, the investment policy is established based on the market conditions. Therefore, the effect of changes in assumptions that relate to financial risk on the investment policy is included in insurance finance income or expenses. In addition, since the dividend policy can be changed at Sony’s discretion, the effect of changes in the dividend policy on the fulfillment cash flows is adjusted in the contractual service margin. | iii) | Risk adjustments fornon-financial risk |
Risk adjustments fornon-financial risk are determined to reflect the compensation that each insurance subsidiary would require for bearingnon-financial risk, and are allocated to groups of insurance contracts based on an analysis of the risk profiles of the groups. Risk adjustments fornon-financial risk reflect the diversification benefits, in a way that is consistent with the compensation that the insurance company would require and that reflects its degree of risk aversion. The risk adjustments fornon-financial risk are determined mainly using a cost of capital technique. In applying a cost of capital technique, Sony determines the risk adjustment fornon-financial risk by applying arate to the amount of capital required for each future reporting date and discounting the result using risk-free rates adjusted for illiquidity. The required capital is determined by estimating the probability distribution of the present value of future cash flows from insurance contracts at each future reporting date and calculating the capital that Sony would require to meet its contractual obligations to pay claims and expenses arising over the duration of the contracts at a 99.5% confidence level. Therate represents the additional reward that investors would require for exposure to thenon-financial risk.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES cash flows are discounte d using risk-free yield curves adjusted to reflect the characteristics of the cash flows and the liquidity of the insurance contracts. Sony determines the risk-free yield curves using the yields on government bonds. The yield curve is determined by incorporating long-term real interest rate and inflation expectations. For extrapolation for the periods in which market data is not available, a method using an ultimate forward rate is used. To be specific, the method uses an ultimate forward rate of 3.5% and starts extrapolation in the 40th year (or the 30th year for U.S. dollar). The forward rates for the 41st year (or the 31st year for U.S. dollar) and onwards are extrapolated so that they will converge to the level of the ultimate forward rate in 30 years, using the Smith-Wilson method. To reflect the liquidity characteristics of the insurance contracts, the risk-free yield curves are adjusted by an illiquidity premium. Illiquidity premiums are determined by setting up a reference portfolio of Sony’s assets. Sony identifies the investment component of an insurance contract by determining the amount that it would be required to repay to the policyholder in all circumstances, regardless of whether an insured event occurs or not. These include circumstances in which an insured event occurs or the contract matures or is terminated without an insured event occurring. Investment components are excluded from insurance revenue and insurance service expenses. | vi) | Determination of coverage units |
The amount of the CSM of a group of insurance contracts that is recognized as insurance revenue in each year is determined by identifying the coverage units in the group and recognizing in profit or loss the amount of the CSM allocated to the coverage units provided during the year. The number of coverage units is determined by considering for each contract the quantity of benefits provided and its expected coverage period. To be specific, Sony determines the quantity of benefits based on: the death benefit amount in the case of contracts for which the death benefit amount increases or decreases based on the period (e.g., whole life, term life and variable life insurance contracts); the premium amount proportionate to the insurance period in the case of contracts whose host contract and riders have different coverage types (e.g., disease and health insurance contracts); and the cash surrender value (or the premium reserve during the annuity payment period) in the case of annuity contracts with investment-related services (e.g., individual variable annuity contracts). Sony considers the characteristics of insurance contracts and aggregates quantities of benefits related to insurance coverage, investment-return services and investment-related services when determining the relative weighting of the benefits provided to the policyholder by these services. | Disclosure of transition to IFRS 17 |
Upon transition to IFRS 17 as of April 1, 2022, Sony determined that it was impracticable to apply the full retrospective approach to certain groups of insurance contracts, as the necessary information was unavailable due to restrictions of contract data and systems in the past or it was impossible to recreate past estimation without the use of hindsight. Sony will apply alternative transition methods (the modified retrospective approach or the fair value approach) to groups of insurance contracts for which the full retrospective approach is impracticable as of the date of the transition.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Sony will apply the following approaches on transition to | | | Year of issue (fiscal year) | | Transition approach | 2015 and thereafter | | For all groups of insurance contracts: Full retrospective approach | 1993 – 2014 | | For groups of insurance contracts with direct participation features and certain groups of insurance contracts without direct participation features: Fair value approach | | For other groups of insurance contracts: Modified retrospective approach | In and before 1992 | | For all groups of insurance contracts: Fair value approach |
Modified retrospective approach The objective of the modified retrospective approach is to achieve the closest outcome to retrospective application possible using reasonable and supportable information available without undue cost or effort. Sony will apply each of the following modifications only to the extent that it does not have reasonable and supportable information to apply IFRS 17 retrospectively. Sony will apply the following modifications to certain groups of insurance contracts: For groups of contracts issued,initiated or acquired from April 1, 1993 to March 31, 2015, the future cash flows on initial recognition are estimated by adjusting the amount as of April 1, 2015, which can be determined retrospectively, for the cash flows that are known to have occurred before that date; For groups of contracts issued, initiated or acquired from April 1, 1993 to March 31, 2013, the illiquidity premiums applied to the observable risk-free yield curves on initial recognition are estimated by determining an average spread between the observable risk-free yield curves and the discount rates, which can be determined retrospectively, for the period from April 1, 2013 to March 31, 2022. The amount of insurance finance income or expenses recognized in accumulated other comprehensive income as of April 1, 2022 is calculated by using this discount rate; and
The risk adjustment fornon-financial risk on initial recognition is determined by adjusting the amount as of April 1, 2022 for the expected release of risk before April 1, 2022. After applying such modifications to fulfillment cash flows, the CSM (or the loss component) on initial recognition is determined as follows: the amount of the CSM recognized as profit or loss before April 1, 2022 is determined by comparing the remaining coverage units as of the date of the transition and the coverage units provided based on groups of insurance contracts before the date of the transition; and the amount allocated to the loss component before April 1, 2022 is determined using the proportion of the loss component relative to the total estimate of the present value of the future cash outflows plus the risk adjustment fornon-financial risk on initial recognition. Under the fair value approach, the CSM (or the loss component) as of April 1, 2022 is determined as the difference between the fair value of a group of insurance contracts at that date and the fulfillment cash flows at that date. For all insurance contracts measured under the fair value approach, Sony uses reasonable and supportable information available as of April 1, 2022 to determine the following matters: how to identify groups of contracts; whether a contract meets the definition of an insurance contract with direct participation features; and how to identify discretionary cash flows for contracts without direct participation features. For groups of contracts measured under the fair value approach, the discount rates on initial recognition are determined as of April 1, 2022 instead of at the date of initial
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES For all insurance contracts measured under the fair value approach, the amount of insurance finance income or expenses recognized in accumulated other comprehensive income as of April 1, 2022 is determined to be zero. Amendments to IAS 1 “Presentation of Financial Statements” In January 2020, the IASB issued “Classification of Liabilities as Current orNon-current” (“Amendments to IAS 1”). The amendments clarify the right to defer settlement, which is one of the existing requirements when classifying a liability to current ornon-current. The amendments will be effective for Sony as of April 1, 2024. The impact of the amendments on Sony’s results of operations and financial position is being evaluated. In October 2022, the IASB issued “ANon-current Liability with Covenants” (“Amendments to IAS 1”). The amendments were issued to improve the information a company provides about long-term debt with covenants by enabling investors to understand the risk that such debt could become repayable within twelve months. The amendments will be effective for Sony as of Apr il 1, 2024. The impact of the amendments on Sony’s results of operations and financial position is being evaluated. | Business segment information |
The reportable segments presented below are the segments of Sony for which separate financial information is available and for which operating income or loss amounts are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM does not evaluate segments using discrete asset information. Sony’s CODM is its Chairman, President and Chief Executive Officer. The former Electronics Products & Solutions segment has been renamed the Entertainment, Technology & Services (ET&S) segment effective from April 2022. This change has not resulted in any reclassification of businesses across segments. The G&NS segment includes the network services businesses, the manufacture and sales of home gaming products and the production and sales of software. The Music segment includes the Recorded Music, Music Publishing and Visual Media and Platform businesses. The Pictures segment includes the Motion Pictures, Television Productions and Media Networks businesses. The ET&S segment includes the Televisions business, the Audio and Video business, the Still and Video Cameras business, the smartphone business and the internet-related service business. The I&SS segment includes the image sensors business. The Financial Services segment primarily represents individual life insurance andnon-life insurance businesses in the Japanese market and the banking business in Japan. All Other consists of various operating activities, including the disc manufacturing and recording media businesses. Sony’s products and services are generally unique to a single operating segment.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Segment sales and financial services revenue: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Sales and financial services revenue: | | | | | | | | | | | | | Game & Network Services — | | | | | | | | | | | | | | | | 2,604,713 | | | | 2,674,356 | | | | 3,538,533 | | | | | 51,565 | | | | 65,407 | | | | 106,065 | | | | | | | | | | | | | | | | | | 2,656,278 | | | | 2,739,763 | | | | 3,644,598 | | | | | | | | | | | | | | | | | | 927,250 | | | | 1,100,532 | | | | 1,364,815 | | | | | 12,617 | | | | 16,417 | | | | 15,817 | | | | | | | | | | | | | | | | | | 939,867 | | | | 1,116,949 | | | | 1,380,632 | | | | | | | | | | | | | | | | | | 751,800 | | | | 1,236,399 | | | | 1,364,887 | | | | | 1,187 | | | | 2,512 | | | | 4,535 | | | | | | | | | | | | | | | | | | 752,987 | | | | 1,238,911 | | | | 1,369,422 | | Entertainment, Technology & Services — | | | | | | | | | | | | | | | | 2,016,887 | | | | 2,297,886 | | | | 2,436,739 | | | | | 51,200 | | | | 41,300 | | | | 39,286 | | | | | | | | | | | | | | | | | | 2,068,087 | | | | 2,339,186 | | | | 2,476,025 | | Imaging & Sensing Solutions — | | | | | | | | | | | | | | | | 937,859 | | | | 992,200 | | | | 1,301,481 | | | | | 74,638 | | | | 84,224 | | | | 100,706 | | | | | | | | | | | | | | | | | | 1,012,497 | | | | 1,076,424 | | | | 1,402,187 | | | | | | | | | | | | | | | | | | 1,664,991 | | | | 1,524,811 | | | | 1,443,996 | | | | | 9,011 | | | | 9,018 | | | | 10,550 | | | | | | | | | | | | | | | | | | 1,674,002 | | | | 1,533,829 | | | | 1,454,546 | | | | | | | | | | | | | | | | | | 84,202 | | | | 82,264 | | | | 72,338 | | | | | 16,534 | | | | 16,519 | | | | 15,285 | | | | | | | | | | | | | | | | | | 100,736 | | | | 98,783 | | | | 87,623 | | Corporate and elimination | | | (205,793 | ) | | | (222,332 | ) | | | (275,196 | ) | | | | | | | | | | | | | | | | | 8,998,661 | | | | 9,921,513 | | | | 11,539,837 | | | | | | | | | | | | | | |
G&NS intersegment amounts primarily consist of transactions with the ET&S segment. ET&S intersegment amounts primarily consist of transactions with the G&NS segment. I&SS intersegment amounts primarily consist of transactions with the G&NS segment and the ET&S segment. Corporate and elimination includes certain brand and patent royalty income.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 341,718 | | | | 346,089 | | | | 250,006 | | | | | 184,786 | | | | 210,933 | | | | 263,107 | | | | | 79,851 | | | | 217,393 | | | | 119,255 | | Entertainment, Technology & Services | | | 127,859 | | | | 212,942 | | | | 179,461 | | Imaging & Sensing Solutions | | | 145,884 | | | | 155,597 | | | | 212,214 | | | | | 154,765 | | | | 150,111 | | | | 223,935 | | | | | 7,178 | | | | 17,981 | | | | 16,849 | | | | | | | | | | | | | | | | | | 1,042,041 | | | | 1,311,046 | | | | 1,264,827 | | Corporate and elimination | | | (86,786 | ) | | | (108,707 | ) | | | (56,621 | ) | | | | | | | | | | | | | | Consolidated operating income | | | 955,255 | | | | 1,202,339 | | | | 1,208,206 | | | | | 83,792 | | | | 19,304 | | | | 31,058 | | | | | (41,082 | ) | | | (104,140 | ) | | | (58,951 | ) | | | | | | | | | | | | | | Consolidated income before income taxes | | | 997,965 | | | | 1,117,503 | | | | 1,180,313 | | | | | | | | | | | | | | |
Operating income (loss) is sales and financial services revenue less costs and expenses, and includes the share of profit (loss) of investments accounted for using the equity method. | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Share of profit (loss) of investments accounted for using the equity method: | | | | | | | | | | | | | | | | — | | | | 14 | | | | 144 | | | | | 570 | | | | 4,073 | | | | 7,063 | | | | | 123 | | | | (664 | ) | | | 515 | | Entertainment, Technology & Services | | | 57 | | | | 1,103 | | | | 1,076 | | Imaging & Sensing Solutions | | | (123 | ) | | | (603 | ) | | | (1,128 | ) | | | | — | | | | — | | | | — | | | | | 10,924 | | | | 19,723 | | | | 16,779 | | | | | | | | | | | | | | | | | | 11,551 | | | | 23,646 | | | | 24,449 | | | | | | | | | | | | | | | Depreciation and amortization: | | | | | | | | | | | | | | | | 52,987 | | | | 61,219 | | | | 87,201 | | | | | 46,217 | | | | 61,465 | | | | 67,240 | | | | | 290,895 | | | | 396,251 | | | | 506,697 | | Entertainment, Technology & Services | | | 82,174 | | | | 91,759 | | | | 97,448 | | Imaging & Sensing Solutions | | | 159,469 | | | | 172,842 | | | | 196,674 | | Financial Services, including deferred insurance acquisition costs | | | 68,598 | | | | 94,169 | | | | 110,856 | | | | | 7,686 | | | | 4,300 | | | | 4,376 | | | | | | | | | | | | | | | | | | 708,026 | | | | 882,005 | | | | 1,070,492 | | | | | 24,085 | | | | 22,465 | | | | 18,621 | | | | | | | | | | | | | | | | | | 732,111 | | | | 904,470 | | | | 1,089,113 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Sales to customers by product category: The following table is a breakdown of sales and financial services revenue to external customers by product category for each segment. Sony management views each segment as a single operating segment. | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Sales and financial services revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | Digital Software and Add-on Content | | | 1,454,654 | | | | 1,424,459 | | | | 1,523,045 | | | | | 382,950 | | | | 409,355 | | | | 464,676 | | | | | 767,109 | | | | 840,542 | | | | 1,550,812 | | | | | | | | | | | | | | | | | | 2,604,713 | | | | 2,674,356 | | | | 3,538,533 | | | | | | | | | | | | | | | Recorded Music — Streaming | | | 337,100 | | | | 462,368 | | | | 598,868 | | | | | 179,167 | | | | 206,412 | | | | 286,270 | | | | | 156,862 | | | | 200,334 | | | | 276,665 | | Visual Media and Platform | | | 254,121 | | | | 231,418 | | | | 203,012 | | | | | | | | | | | | | | | | | | 927,250 | | | | 1,100,532 | | | | 1,364,815 | | | | | | | | | | | | | | | | | | 265,301 | | | | 518,840 | | | | 464,043 | | | | | 267,123 | | | | 419,494 | | | | 536,250 | | | | | 219,376 | | | | 298,065 | | | | 364,594 | | | | | | | | | | | | | | | | | | 751,800 | | | | 1,236,399 | | | | 1,364,887 | | Entertainment, Technology & Services | | | | | | | | | | | | | | | | 709,007 | | | | 858,837 | | | | 733,251 | | | | | 313,975 | | | | 326,704 | | | | 391,608 | | | | | 338,694 | | | | 414,898 | | | | 565,018 | | | | | 358,580 | | | | 365,864 | | | | 356,771 | | | | | 296,631 | | | | 331,583 | | | | 390,091 | | | | | | | | | | | | | | | | | | 2,016,887 | | | | 2,297,886 | | | | 2,436,739 | | Imaging & Sensing Solutions | | | 937,859 | | | | 992,200 | | | | 1,301,481 | | | | | 1,664,991 | | | | 1,524,811 | | | | 1,443,996 | | | | | 84,202 | | | | 82,264 | | | | 72,338 | | | | | 10,959 | | | | 13,065 | | | | 17,048 | | | | | | | | | | | | | | | | | | 8,998,661 | | | | 9,921,513 | | | | 11,539,837 | | | | | | | | | | | | | | |
In the G&NS segment, Digital Software andAdd-on Content includes distribution of software titles andadd-on content through the network by Sony Interactive Entertainment; Network Services includes network services relating to game, video and music content; Hardware and Others includes home gaming consoles, packaged software, game software sold bundled with home gaming consoles, peripheral devices and first-party software for third-party platforms. In the Music segment, Recorded Music — Streaming includes the distribution of digital recorded music by streaming; Recorded Music — Others includes the distribution of recorded music by physical media and digital download as well as revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes the production and distribution of animation titles and game applications, and various service offerings for music and visual products. In the Pictures segment, Motion Pictures includes the worldwide production, acquisition and distribution of live-action and animated motion pictures; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television networks and DTC streaming services worldwide. In the ET&S segment, Televisions includes LCD and OLED televisions; Audio and Video includesBlu-ray disc players and recorders, home audio, headphones
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES and memory-based portable audio devices; Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for broadcast; Mobile Communications includes smartphones and an internet-related service business; Other includes display products such as projectors and medical equipment. Sales and financial services revenue attributed to countries and areas based on location of external customers for the fiscal years ended March 31, 2021, 2022 and 2023 andnon-current assets (property, plant and equipment, ROU assets, goodwill, content assets and other intangible assets) as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Sales and financial services revenue: | | | | | | | | | | | | | | | | 2,965,936 | | | | 2,764,321 | | | | 2,691,972 | | | | | 2,147,686 | | | | 2,766,021 | | | | 3,401,402 | | | | | 1,817,854 | | | | 1,870,091 | | | | 2,190,311 | | | | | 762,766 | | | | 771,006 | | | | 855,437 | | | | | 861,623 | | | | 1,149,261 | | | | 1,563,414 | | | | | 442,796 | | | | 600,813 | | | | 837,301 | | | | | | | | | | | | | | | | | | 8,998,661 | | | | 9,921,513 | | | | 11,539,837 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-current assets (property, plant and equipment, assets, goodwill, content assets and other intangible assets): | | | | | | | | | | | | | | | | | | | | 1,592,981 | | | | 1,875,354 | | | | | | | | | 1,830,602 | | | | 2,417,228 | | | | | | | | | 565,044 | | | | 603,338 | | | | | | | | | 34,029 | | | | 34,322 | | | | | | | | | 158,030 | | | | 186,359 | | | | | | | | | 91,001 | | | | 107,162 | | | | | | | | | | | | | | | | | | | | | | 4,271,687 | | | | 5,223,763 | | | | | | | | | | | | | | |
Major countries and areas in each geographic segment excluding Japan, United States and China are as follows: | | | | | United Kingdom, France, Germany, Russia, Spain and Italy | | | India, South Korea, Oceania, Thailand and Malaysia | | | The Middle East/Africa, Brazil, Mexico and Canada |
There are no individually material countries with respect to sales and financial services revenue ornon-current assets (property, plant and equipment, ROU assets, goodwill, content assets and other intangible assets) included in Europe, Asia-Pacific and Other Areas. As of March 31, 2023, Sony has suspended its business in Russia. Transfers between reportable business segments or geographic areas are made at individually negotiated prices that are intended to reflect a market-based transfer price. There were no sales or financial services revenue with any single major external customer for the fiscal years ended March 31, 2021, 2022 and 2023.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | Financial services expenses include a provision for policy reservesinstruments |
| Financial instruments by measurement method |
The carrying amount of Sony’s assets and liabilities by measurement method as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at amortized cost (“AC”) | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | 358,238 | | | | 422,025 | | Housing loans in the banking business | | | 2,752,985 | | | | 3,129,393 | | | | | 230,516 | | | | 229,666 | | Trade and other receivables * | | | | | | | | | | | | 1,617,323 | | | | 1,761,025 | | | | | 2,736 | | | | 2,712 | | | | | | | | | | | | | | 39,223 | | | | 36,671 | | | | | 121,856 | | | | 95,813 | | Non-current other receivables in the Pictures segment | | | 166,279 | | | | 152,619 | | | | | 16,425 | | | | 19,582 | | Financial assets required to be measured at fair value through profit or loss (“FVPL”) | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | 1,012,057 | | | | 1,059,718 | | | | | 1,798,536 | | | | 2,123,062 | | | | | | | | | | | | | | 16,013 | | | | 20,905 | | | | | 120,274 | | | | 125,590 | | | | | 61,023 | | | | 70,144 | | Financial assets designated to be measured at FVPL | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | 267,169 | | | | 188,906 | | Financial assets required to be measured at fair value through other comprehensive income (“FVOCI”) | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | 12,378,244 | | | | 11,615,862 | | | | | | | | | | | | | | 522 | | | | 125 | | Financial assets designated to be measured at FVOCI | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | 8,016 | | | | 5,453 | | | | | | | | | | | | | | 303,992 | | | | 421,845 | | | | | | | | | | | | | | 21,271,427 | | | | 21,481,116 | | | | | | | | | | | | | | 2,130,033 | | | | 2,203,044 | | | | | 19,141,394 | | | | 19,278,072 | |
* | The amounts of trade and amortizationother receivables exclude contract assets within trade and other receivables, and contract assets in the consolidated statements of deferred insurance acquisition costs, interest expensesfinancial position. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Cash and cash equivalents are excluded from the table above. Refer to Note 27. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at AC | | | | | | | | | | | | 1,976,553 | | | | 1,914,934 | | Current portion of long-term debt | | | 171,409 | | | | 187,942 | | | | | | | | | | | | | | 1,716,316 | | | | 1,701,598 | | | | | 126,926 | | | | 162,475 | | Deposits from customers in the banking business *1 | | | 3,004,215 | | | | 3,306,981 | | | | | 1,203,646 | | | | 1,767,696 | | Deferred consideration *2 | | | — | | | | 87,937 | | Other financial liabilities | | | 63,281 | | | | 61,128 | | Financial liabilities required to be measured at FVPL | | | | | | | | | Other financial liabilities | | | | | | | | | | | | 72,120 | | | | 34,123 | | | | | 21,552 | | | | 51,512 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | Other financial liabilities | | | | | | | | | Redeemable noncontrolling interests | | | 34,995 | | | | 47,326 | | | | | | | | | | | | | | 8,391,013 | | | | 9,323,652 | | | | | | | | | | | | | | 6,975,408 | | | | 7,205,678 | | | | | 1,415,605 | | | | 2,117,974 | |
*1 | Deposits from customers in the banking business include thenon-current portion that is recorded within other financial liabilities in the consolidated statements of financial position. |
*2 | Deferred consideration is recorded within other financial liabilities or trade and allother payables in the consolidated statements of financial position. |
| Financial instruments measured at fair value on a recurring basis |
The following section describes the valuation techniques used by Sony to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Debt instruments and equity instruments Where quoted prices of financial instruments are available in an active market, these instruments are classified in Level 1 of the fair value hierarchy. Level 1 financial instruments include exchange-traded equity instruments. If quoted market prices are not available for the specific financial instruments or the market is inactive, then fair values are estimated by using pricing models, quoted prices of financial instruments with similar characteristics or discounted cash flows and mainly classified in Level 2 of the fair value hierarchy. Level 2 financial instruments include debt instruments with quoted prices that are not traded as actively as exchange-traded instruments, such as the majority of government bonds and corporate bonds. In certain cases where there is limited activity or less transparency around inputs to the valuation, these instruments are classified within Level 3 of the fair value hierarchy. Level 3 financial instruments primarily include certain private equity investments, investment funds, securitized products which are not classified within Level 1 or Level 2 and domestic and foreign corporate bonds for which quoted prices are not available in a market and where there is less transparency around inputs. Sony estimates the fair value for private equity investments primarily by using comparable company analysis and discounted cash flow method. The price bo ok-value ratio and price earnings ratio of comparable companies, as well as cost of capital and EBITDA multiples for the terminal value used in
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES discounted cash flow method, are primarily used as significant unobservable inputs in the fair value measurement of equity securities classified as Level 3. The fair value increases (decreases) as the price book-value ratio and price earnings ratio of comparable companies rise (decline). In addition, the fair value increases (decreases), as the cost of capital declines (rises) and EBITDA multiples rise (decline), both of which are used in discounted cash flow. Sony estimates the fair value for certain investment funds by using the net asset value. Sony estimates the fair value for securitized products and domestic and foreign corporate bonds for which quoted prices are not available in a market and where there is less transparency around inputs by using third-party information such as indicative quotes from dealers without adjustment or discounted cash flows. For validating the fair values of Level 3 financial instruments, Sony primarily uses internal models which include management judgment or estimation of assumptions that market participants would use in pricing the asset. Exchange-traded derivatives valued using quoted prices are classified within Level 1 of the fair value hierarchy. However, few classes of derivative contracts are listed on an exchange; thus, the majority of Sony’s derivative positions are valued using internally developed models that use as their basis readily observable market parameters, meaning parameters that are actively quoted and can be validated to external sources, including pricing services. Depending on the types and contractual terms of derivatives, fair value can be modeled using a series of techniques, such as the Black-Scholes option pricing model, which are consistently applied. For derivative products that have been established for some time, Sony uses models that are widely accepted in the financial services industry. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, volatility, and the credit rating of the counterparty. Further, many of these models do not contain a high level of subjectivity as the techniques used in the models do not require significant judgment, and inputs to the model are readily observable from actively quoted markets. Such instruments are generally classified within Level 2 of the fair value hierarchy. In determining the fair value of Sony’s interest rate swap derivatives, Sony uses the present value of expected cash flows based on market observable interest rate yield curves commensurate with the term of each instrument. For foreign currency derivatives, Sony’s approach is to use forward contract valuation models employing market observable inputs, such as spot currency rates and time value. These derivatives are classified within Level 2 since Sony primarily uses observable inputs in its valuation of its derivative assets and liabilities.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2022 and 2023 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 368,273 | | | | — | | | | 368,273 | | | | — | | | | — | | | | 368,273 | | | | — | | Japanese local government bonds | | | — | | | | 600 | | | | — | | | | 600 | | | | — | | | | — | | | | 600 | | | | — | | | | | — | | | | 15,350 | | | | 18 | | | | 15,368 | | | | — | | | | — | | | | 15,317 | | | | 51 | | | | | 29,237 | | | | 185,238 | | | | — | | | | 214,475 | | | | — | | | | — | | | | 214,475 | | | | — | | | | | — | | | | — | | | | 117 | | | | 117 | | | | — | | | | — | | | | — | | | | 117 | | | | | — | | | | — | | | | 3,713 | | | | 3,713 | | | | — | | | | — | | | | 3,713 | | | | — | | | | | — | | | | 377,004 | | | | 48,520 | | | | 425,524 | | | | 3 | | | | — | | | | 409,676 | | | | 15,845 | | | | | 1,906,244 | | | | 9,349 | | | | 3,217 | | | | 1,918,810 | | | | — | | | | — | | | | 1,798,536 | | | | 120,274 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 26,795 | | | | — | | | | 26,795 | | | | — | | | | 32 | | | | — | | | | 26,763 | | Foreign exchange contracts | | | — | | | | 30,204 | | | | — | | | | 30,204 | | | | — | | | | 28,147 | | | | — | | | | 2,057 | | | | | — | | | | — | | | | 4,024 | | | | 4,024 | | | | — | | | | 3,669 | | | | — | | | | 355 | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 48,711 | | | | — | | | | 48,711 | | | | 4,002 | | | | — | | | | 44,709 | | | | — | | Japanese local government bonds | | | — | | | | 26,612 | | | | — | | | | 26,612 | | | | 5,315 | | | | — | | | | 21,297 | | | | — | | | | | — | | | | 7,228 | | | | — | | | | 7,228 | | | | 3,907 | | | | — | | | | 3,321 | | | | — | | | | | — | | | | 17,598 | | | | — | | | | 17,598 | | | | 1,466 | | | | — | | | | 16,132 | | | | — | | | | | — | | | | 163,395 | | | | 3,625 | | | | 167,020 | | | | 33,690 | | | | — | | | | 133,330 | | | | — | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 9,667,158 | | | | — | | | | 9,667,158 | | | | — | | | | — | | | | 9,667,158 | | | | — | | Japanese local government bonds | | | — | | | | 36,369 | | | | — | | | | 36,369 | | | | 12,435 | | | | — | | | | 23,934 | | | | — | | | | | — | | | | 746,223 | | | | 154,245 | | | | 900,468 | | | | 10,257 | | | | — | | | | 890,211 | | | | — | | | | | — | | | | 1,353,394 | | | | — | | | | 1,353,394 | | | | — | | | | — | | | | 1,353,277 | | | | 117 | | | | | — | | | | 318,699 | | | | 20,837 | | | | 339,536 | | | | 65,000 | | | | — | | | | 274,131 | | | | 405 | | | | | — | | | | 41,982 | | | | 39,859 | | | | 81,841 | | | | — | | | | — | | | | 81,841 | | | | — | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 106,499 | | | | — | | | | 205,509 | | | | 312,008 | | | | — | | | | — | | | | 8,016 | | | | 303,992 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,041,980 | | | | 13,440,182 | | | | 483,684 | | | | 15,965,846 | | | | 136,075 | | | | 31,848 | | | | 15,327,947 | | | | 469,976 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 7,530 | | | | — | | | | 7,530 | | | | 471 | | | | 7,059 | | Foreign exchange contracts | | | — | | | | 36,582 | | | | — | | | | 36,582 | | | | 36,582 | | | | — | | | | | 11,903 | | | | 16,105 | | | | — | | | | 28,008 | | | | 28,008 | | | | — | | | | | — | | | | — | | | | 21,552 | | | | 21,552 | | | | 1,475 | | | | 20,077 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interests | | | — | | | | — | | | | 34,995 | | | | 34,995 | | | | 2,435 | | | | 32,560 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 11,903 | | | | 60,217 | | | | 56,547 | | | | 128,667 | | | | 68,971 | | | | 59,696 | | | | | | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 422,739 | | | | — | | | | 422,739 | | | | — | | | | — | | | | 422,739 | | | | — | | Japanese local government bonds | | | — | | | | 600 | | | | — | | | | 600 | | | | — | | | | — | | | | 600 | | | | — | | | | | — | | | | 16,872 | | | | 38 | | | | 16,910 | | | | — | | | | — | | | | 16,872 | | | | 38 | | | | | 30,100 | | | | 173,393 | | | | — | | | | 203,493 | | | | — | | | | — | | | | 203,493 | | | | — | | | | | — | | | | 5,515 | | | | 3,377 | | | | 8,892 | | | | — | | | | — | | | | 5,515 | | | | 3,377 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | — | | | | 367,193 | | | | 60,796 | | | | 427,989 | | | | — | | | | — | | | | 410,499 | | | | 17,490 | | | | | 2,236,646 | | | | 5,217 | | | | 6,789 | | | | 2,248,652 | | | | — | | | | — | | | | 2,123,062 | | | | 125,590 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 43,844 | | | | — | | | | 43,844 | | | | — | | | | 438 | | | | — | | | | 43,406 | | Foreign exchange contracts | | | — | | | | 21,318 | | | | — | | | | 21,318 | | | | — | | | | 19,978 | | | | — | | | | 1,340 | | | | | 290 | | | | — | | | | 4,692 | | | | 4,982 | | | | — | | | | 4,982 | | | | — | | | | — | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 8,830 | | | | — | | | | 8,830 | | | | 1,001 | | | | — | | | | 7,829 | | | | — | | Japanese local government bonds | | | — | | | | 16,038 | | | | — | | | | 16,038 | | | | 2,010 | | | | — | | | | 14,028 | | | | — | | | | | — | | | | 3,315 | | | | — | | | | 3,315 | | | | — | | | | — | | | | 3,315 | | | | — | | | | | — | | | | 15,325 | | | | — | | | | 15,325 | | | | — | | | | — | | | | 15,325 | | | | — | | | | | — | | | | 141,857 | | | | 3,541 | | | | 145,398 | | | | 21,227 | | | | — | | | | 124,171 | | | | — | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 9,095,550 | | | | — | | | | 9,095,550 | | | | — | | | | — | | | | 9,095,550 | | | | — | | Japanese local government bonds | | | — | | | | 43,655 | | | | — | | | | 43,655 | | | | 1,369 | | | | — | | | | 42,286 | | | | — | | | | | — | | | | 736,204 | | | | 171,622 | | | | 907,826 | | | | 6,815 | | | | — | | | | 901,011 | | | | — | | | | | — | | | | 1,166,279 | | | | — | | | | 1,166,279 | | | | — | | | | — | | | | 1,166,154 | | | | 125 | | | | | — | | | | 307,717 | | | | 24,672 | | | | 332,389 | | | | 46,367 | | | | — | | | | 286,022 | | | | — | | | | | — | | | | 29,697 | | | | 40,591 | | | | 70,288 | | | | — | | | | — | | | | 70,288 | | | | — | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 103,270 | | | | — | | | | 324,028 | | | | 427,298 | | | | — | | | | — | | | | 5,453 | | | | 421,845 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,370,306 | | | | 12,621,158 | | | | 640,146 | | | | 15,631,610 | | | | 78,789 | | | | 25,398 | | | | 14,914,212 | | | | 613,211 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 5,656 | | | | — | | | | 5,656 | | | | 427 | | | | 5,229 | | Foreign exchange contracts | | | — | | | | 19,876 | | | | — | | | | 19,876 | | | | 18,679 | | | | 1,197 | | | | | 3,321 | | | | 5,270 | | | | — | | | | 8,591 | | | | 8,591 | | | | — | | | | | — | | | | — | | | | 51,512 | | | | 51,512 | | | | 14,790 | | | | 36,722 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interests | | | — | | | | — | | | | 47,326 | | | | 47,326 | | | | — | | | | 47,326 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,321 | | | | 30,802 | | | | 98,838 | | | | 132,961 | | | | 42,487 | | | | 90,474 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents are excluded from the tables above. Refer to Note 27. Transfers of debt securities from Level 2 to Level 1 were 1,953 million yen and 2,704 million yen for the fiscal years ended March 31, 2022 and 2023, respectively, as quoted prices inacti ve markets for certain debt securities became available. Transfers of debt securities from Level 1 to Level 2 were 2,523 million yen
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES 1,982 million yen for the fiscal years ended March 31, 2022 and 2023, respectively, as quoted prices in active markets for certain debt securities were not available. Transfers of equity securities from Level 2 to Level 1 were 12,276 million yen and 24,958 million yen for the fiscal years ended March 31, 2022 and 2023, respectively, as quoted prices in active markets for certain equity securities became available. The valuation techniques used to measure the fair value of assets and liabilities classified as Level 3, significant unobservable inputs, and their range are as follows: | | | | | | | | | | | | | | | | | | | | | | Significant unobservable inputs | | | | | | | | | | | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Discounted cash flow | | | | Credit spread * | | | | 26bp-67bp | | | | 34bp-63bp | | | | | 0bp-170bp | | | | 10bp | | | | | 100bp-160bp | | | | 150bp-190bp | |
The decrease (increase) in fair value is the result of rise (decline) of credit spreads. For the above assets classified as Level 3, the fair value would not change significantly, even if one or more of the significant unobservable inputs are changed to reflect reasonably possible alternative assumptions. The changes in fair value of Level 3 assets and liabilities for the fiscal years ended March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 62 | | | | — | | | | — | | | | 20 | | | | — | | | | — | | | | (34 | ) | | | (30 | ) | | | 18 | | | | | 213 | | | | 5 | | | | — | | | | 10 | | | | — | | | | — | | | | — | | | | (111 | ) | | | 117 | | | | | 6,142 | | | | — | | | | — | | | | — | | | | (2,429 | ) | | | — | | | | — | | | | — | | | | 3,713 | | | | | 37,254 | | | | 5,678 | | | | 394 | | | | 22,079 | | | | (16,885 | ) | | | — | | | | — | | | | — | | | | 48,520 | | | | | 3,172 | | | | (395 | ) | | | (15 | ) | | | 477 | | | | (22 | ) | | | — | | | | — | | | | — | | | | 3,217 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,176 | | | | (6,629 | ) | | | 477 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,024 | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 337 | | | | — | | | | — | | | | — | | | | 3,288 | | | | — | | | | — | | | | 3,625 | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 93,288 | | | | (1 | ) | | | (13,006 | ) | | | 73,964 | | | | — | | | | — | | | | — | | | | — | | | | 154,245 | | | | | 18,066 | | | | 700 | | | | (5 | ) | | | 12,000 | | | | (9,868 | ) | | | — | | | | — | | | | (56 | ) | | | 20,837 | | | | | 9,402 | | | | 279 | | | | (82 | ) | | | 41,763 | | | | (10,625 | ) | | | 3,166 | | | | (4,044 | ) | | | — | | | | 39,859 | | Financial assets designated to be me asured a t FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 104,541 | | | | — | | | | 25,614 | | | | 89,274 | | | | (5,825 | ) | | | 63 | | | | (7,884 | ) | | | (274 | ) | | | 205,509 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,161 | | | | 297 | | | | 1,645 | | | | 15,221 | | | | (1,762 | ) | | | — | | | | — | | | | (10 | ) | | | 21,552 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interests | | | 8,179 | | | | 2,008 | | | | 2,978 | | | | 27,240 | | | | (5,285 | ) | | | — | | | | — | | | | (125 | ) | | | 34,995 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18 | | | | — | | | | — | | | | 20 | | | | — | | | | — | | | | — | | | | — | | | | 38 | | | | | 117 | | | | (14 | ) | | | — | | | | 3,434 | | | | (70 | ) | | | — | | | | — | | | | (90 | ) | | | 3,377 | | | | | 3,713 | | | | — | | | | — | | | | — | | | | (3,713 | ) | | | — | | | | — | | | | — | | | | — | | | | | 48,520 | | | | (2,541 | ) | | | 395 | | | | 17,254 | | | | (2,832 | ) | | | — | | | | — | | | | — | | | | 60,796 | | | | | 3,217 | | | | (413 | ) | | | — | | | | 4,021 | | | | (36 | ) | | | — | | | | — | | | | — | | | | 6,789 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,024 | | | | (393 | ) | | | 356 | | | | 705 | | | | — | | | | — | | | | — | | | | — | | | | 4,692 | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,625 | | | | (84 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,541 | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 154,245 | | | | 6 | | | | (30,203 | ) | | | 47,574 | | | | — | | | | — | | | | — | | | | — | | | | 171,622 | | | | | 20,837 | | | | 598 | | | | — | | | | 24,362 | | | | (21,125 | ) | | | — | | | | — | | | | — | | | | 24,672 | | | | | 39,859 | | | | (389 | ) | | | 6 | | | | 13,575 | | | | (15,048 | ) | | | 6,712 | | | | (4,124 | ) | | | — | | | | 40,591 | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 205,509 | | | | — | | | | (24,913 | ) | | | 143,611 | | | | (126 | ) | | | 146 | | | | (600 | ) | | | 401 | | | | 324,028 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 21,552 | | | | (475 | ) | | | 1,240 | | | | 43,455 | | | | (13,951 | ) | | | — | | | | — | | | | (309 | ) | | | 51,512 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interests | | | 34,995 | | | | (1,410 | ) | | | 2,877 | | | | 13,670 | | | | (2,802 | ) | | | — | | | | — | | | | (4 | ) | | | 47,326 | |
*1 | For liability items, gains are presented as negative and losses are presented as positive. |
*2 | Gains (losses) recognized in net income are included in financ ial services revenue, other operating costs, such as employee benefits(income) expense, net, financial income and financial expenses depreciationin the consolidated statements of property, plantincome. |
*3 | Gains (losses) recognized in other comprehensive income are included in changes in equity instruments measured at fair value through other comprehensive income, changes in debt instruments measured at fair value through other comprehensive income and equipment,exchange differences on translating foreign operations in the consolidated statements of comprehensive income. |
*4 | Certainassets were transferred to Level 3 because the observability of the inputs used decreased. |
*5 | Certainfinancial assets were transferred from Level 3 because observable market data became available. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The changes in unrealized gains (losses) recognized in net income for Level 3 assets and liabilities held as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | 5 | | | | (14 | ) | | | | 4,562 | | | | (2,420 | ) | | | | 98 | | | | (413 | ) | | | | | | | | | | | | | (6,629 | ) | | | (393 | ) | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | 337 | | | | (84 | ) | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | — | | | | 6 | | | | | 700 | | | | 598 | | | | | 238 | | | | (389 | ) | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | (513 | ) | | | (2,683 | ) | Financial liabilities designated to be measured at FVPL | | | | | | | | | Redeemable noncontrolling interests | | | (1,878 | ) | | | 1,410 | |
Gains (losses) recognized in net income are included in financial services revenue, other operating (income) expense, net, financial income and financial expenses in the consolidated statements of income. Sony generally elects to designate investments in equity instruments held to promote its businesses and to maintain and enhance the business relationship as financial assets measured at fair value through other comprehensive income based on the purposes of holding the investments. Equity instruments measured at fair value through other comprehensive income as of March 31, 2022 and 2023 comprise the following: | | | | | | | | | | | | | | | | | | | | | | | | Marketable equity instruments | | | 106,499 | | | | 103,270 | | Non-marketable equity instruments | | | 205,509 | | | | 324,028 | | | | | | | | | | | | | | 312,008 | | | | 427,298 | | | | | | | | | | |
Significant marketable equity instruments measured at fair value through other comprehensive income as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | 54,162 | | | | 54,214 | | | | | 8,371 | | | | 10,407 | | | | | — | | | | 10,061 | | | | | 9,161 | | | | 8,017 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The balances of thenon-marketable instruments measured at fair value through other comprehensive income by major sector categories as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | 148,283 | | | | 259,214 | | | | | 35,406 | | | | 35,182 | | Information technology, Communication and Service *3 | | | 20,327 | | | | 27,136 | |
*1 | Major investments included Epic Games, Inc. and office rentalScopely, Inc. |
*2 | Major investments included Nichia Corporation. |
*3 | Major investments included Semiconductor Energy Laboratory Co., Ltd. |
In order to enhance the efficiency of using assets held effectively, Sony derecognizes equity instruments measured at fair value through other comprehensive income upon the sale of the investment. Information relating to investments derecognized during the fiscal years ended March 31, 2022 and 2023 is as follows: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Fair value at derecognition | | | 11,015 | | | | 625 | | Cumulative amount recognized in other comprehensive income, net of tax * | | | 5,784 | | | | (298 | ) | | | | 70 | | | | 8 | |
* | The cumulative amount recognized in other comprehensive income, net of subsidiaries,tax, was transferred to retained earnings upon derecognition of the equity instruments. |
| Financial instruments measured at amortized cost |
The fair values by fair value hierarchy level of certain financial instruments that are measured at amortized cost as of March 31, 2022 and 2023 are summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 86,622 | | | | — | | | | 86,622 | | | | 75,634 | | Japanese local government bonds | | | — | | | | 1,963 | | | | — | | | | 1,963 | | | | 1,717 | | | | | — | | | | 3,727 | | | | — | | | | 3,727 | | | | 3,583 | | | | | — | | | | 5,121 | | | | — | | | | 5,121 | | | | 5,047 | | | | | — | | | | — | | | | 269,376 | | | | 269,376 | | | | 271,308 | | | | | — | | | | 41 | | | | 909 | | | | 950 | | | | 949 | | Housing loans in the banking business | | | — | | | | — | | | | 2,837,349 | | | | 2,837,349 | | | | 2,752,985 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 97,474 | | | | 3,107,634 | | | | 3,205,108 | | | | 3,111,223 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt including the current portion | | | — | | | | 841,249 | | | | 60,873 | | | | 902,122 | | | | 909,706 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 841,249 | | | | 60,873 | | | | 902,122 | | | | 909,706 | | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLID ATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 83,357 | | | | — | | | | 83,357 | | | | 79,550 | | Japanese local government bonds | | | — | | | | 1,803 | | | | — | | | | 1,803 | | | | 1,618 | | | | | — | | | | 3,337 | | | | — | | | | 3,337 | | | | 3,483 | | | | | — | | | | 4,814 | | | | — | | | | 4,814 | | | | 4,796 | | | | | — | | | | — | | | | 324,153 | | | | 324,153 | | | | 331,354 | | | | | — | | | | 41 | | | | 1,173 | | | | 1,214 | | | | 1,224 | | Housing loans in the banking business | | | — | | | | — | | | | 3,184,060 | | | | 3,184,060 | | | | 3,129,393 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 93,352 | | | | 3,509,386 | | | | 3,602,738 | | | | 3,551,418 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt including the current portion | | | — | | | | 1,343,077 | | | | 67,844 | | | | 1,410,921 | | | | 1,423,392 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 1,343,077 | | | | 67,844 | | | | 1,410,921 | | | | 1,423,392 | | | | | | | | | | | | | | | | | | | | | | |
The table above does not include financial instruments measured at amortized cost whose carrying amounts approximate their fair values mainly due to their short-term nature. The fair values of long-term debt, including the current portion classified as Level 2, were estimated mainly based on discounted future cash flows using Sony’s current rates for similar liabilities. Financial instruments classified as Level 3 mainly include housing loans in the banking business, securitized products and certain bonds issued by Sony. In determining the fair value of such financial instruments, Sony uses the present value of expected cash flows based on risk-free interest rate yield curves with certain credit risk. | Income and expenses related to financial instruments in the Financial Services segment.segment |
Income and expenses related to financial instruments in the Financial Services segment are recorded in financial services revenue and financial services expenses in the consolidated statements of income. Income and expenses related to financial instruments in all segments other than Financial Services segment are recorded in Financial income and Financial expenses in the consolidated statements of income. Refer to Note 24. The breakdown of income and expenses related to financial instruments in the Financial Services segment for the fiscal years ended March 31, 2021, 2022 and 2023 is as follows: (21) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial instruments required to be measured at FVPL | | | Financial instruments designated to be measured
| | | Financial assets measured at AC | | | Financial liabilities measured at AC | | | Debt instruments measured at FVOCI | | | Equity instruments measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net gains (losses) recognized in profit or loss | | | 412,957 | | | | 4,936 | | | | (14,069 | ) | | | (5,569 | ) | | | 51,194 | | | | — | | | | 449,449 | | | | | — | | | | — | | | | 26,141 | | | | — | | | | 169,072 | | | | — | | | | 195,213 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2 | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | 4,577 | | | | — | | | | — | | | | 4,577 | | Impairment losses (gains) on financial assets | | | — | | | | — | | | | (15 | ) | | | — | | | | 18 | | | | — | | | | 3 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | |
Advertising costs are expensed as incurred.
(22) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial instruments required to be measured at FVPL | | | Financial instruments designated to be measured
| | | Financial assets measured at AC | | | Financial liabilities measured at AC | | | Debt instruments measured at FVOCI | | | Equity instruments measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net gains (losses) recognized in profit or loss | | | 225,922 | | | | (6,673 | ) | | | 14,765 | | | | (49,110 | ) | | | 148,813 | | | | — | | | | 333,717 | | | | | — | | | | — | | | | 32,839 | | | | — | | | | 180,006 | | | | — | | | | 212,845 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 85 | | | | 85 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | 3,838 | | | | — | | | | — | | | | 3,838 | | Impairment losses (gains) on financial assets | | | — | | | | — | | | | 19 | | | | — | | | | 24 | | | | — | | | | 43 | | | | | | | | | | | | | | Financial instruments required to be measured at FVPL | | | Financial instruments designated to be measured
| | | Financial assets measured at AC | | | Financial liabilities measured at AC | | | Debt instruments measured at FVOCI | | | Equity instruments measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net gains (losses) recognized in profit or loss | | | 47,709 | | | | (2,493 | ) | | | 14,944 | | | | (58,484 | ) | | | 140,589 | | | | — | | | | 142,265 | | | | | — | | | | — | | | | 47,054 | | | | — | | | | 198,549 | | | | — | | | | 245,603 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 195 | | | | 195 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | 29,774 | | | | — | | | | — | | | | 29,774 | | Impairment losses (gains) on financial assets | | | — | | | | — | | | | 144 | | | | — | | | | 8 | | | | — | | | | 152 | |
| Financial risk management |
| Shipping and handling costs -Sony uses Return on Equity (“ROE”) as an indicator for capital risk management. * | ROE is calculated using equity attributable to Sony Group Corporation’s stockholders. |
Sony manages capital separately for the Financial Services segment and the Sony Group without the Financial Services segment because certain subsidiaries in the Financial Services segment are subject to the below restrictions. Sony also refers to the ratio of stockholders’ equity to total assets of the Sony Group without the Financial Services segment to ensure financial soundness. In the Financial Services segment, Sony is required to maintain the capital adequacy ratio and net assets at a certain level or higher based on the Insurance Business Act and the Banking Act in Japan. Material requirements which Sony is subject to are as follows: Insurance business: Maintain solvency margin ratio The life insurance subsidiary and thenon-life insurance subsidiary have maintained a high solvency margin ratio, relative to the Japanese domestic minimum solvency margin ratio requirements.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Banking business: Maintain capital adequacy ratio The banking subsidiary has maintained a capital adequacy ratio relative to the Japanese domestic criteria. Accordingly, lending and borrowing between subsidiaries in the Financial Services segment and the other companies within Sony Group is strictly limited. The carrying amounts of total assets of Sony Financial Group Inc. (“SFGI”) as of March 31, 2022 and 2023 are 20,974,027 million yen and 20,805,535 million yen, respectively. Total liabilities of SFGI as of March 31, 2022 and 2023 are 18,392,874 million yen and 18,990,548 million yen, respectively. |
| The majority of shipping and handling, warehousing and internal transfer costs for finished goods |
For interest rate risk inherent in the insurance business, which is included in the Financial Services segment, refer to Note 13. For interest rate risk inherent in the banking business, which is included in the Financial Services segment, refer to (7) Market risks for the banking business. Risk management policy and exposure Interest rate risk is the risk the fair value of a financial instrument or future cash flows of the financial instrument will fluctuate because of changes in market interest rates. Sony without the Financial Services segment is exposed to interest rate risk that is mainly related to its liabilities such as short-term borrowings and long-term debt as well as bonds. The amount of interest will be affected by changes in market interest rates; therefore, Sony is exposed to the interest rate risk that the future cash outflows for interest payments will fluctuate. Sony raises funds by issuing fixed-rate bonds in order to avoid an increase in future interest payments that is mainly resulting from an increase in interest rates. Also, Sony utilizes interest rate swap agreements to reduce funding costs, to diversify sources of funding, and to hedge the downside risk on borrowings and debt securities resulting from unfavorable fluctuations of interest rates and currency exchange rates, and from changes in the fair value of financial instruments. Therefore, the interest rate risk associated with cash flows of Sony without the Financial Services segment is not significant. For price risk inherent in the insurance business, which is included in the Financial Services segment, refer to Note 13. For price risk inherent in the banking business, which is included in the Financial Services segment, refer to (7) Market risks for the banking business. Risk management policy and exposure Sony is exposed to securities price risk inherent in holding of equities in other entities in Japan and overseas countries. Sony periodically assesses fair values of equity instruments and the financial conditions of the issuers of such equity instruments, and reviews its portfolio on a regular basis. Price sensitivity analysis The table below shows the effects on income before income taxes and other comprehensive income (before considering the tax effects) as of March 31, 2022 and 2023 if market prices of marketable equity instruments (e.g., stocks) had decreased by 10%. | | | | | | | | | | | | | | | | | | | | | | | | Income before income taxes | | | (11,604 | ) | | | (11,734 | ) | Other comprehensive income (before considering the tax effects) | | | (9,871 | ) | | | (9,800 | ) |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES For liquidity risk inherent in the insurance business, which is included in the Financial Services segment, refer to Note 13. This section does not include information regarding the insurance business other than maturity analysis for financial liabilities. The description below covers basic financial policy and figures for Sony’s consolidated operations except for the Financial Services segment and certain subsidiaries, which secure liquidity on their own. Furthermore, the banking business in the Financial Services segment is described separately at the end of this section. Liquidity Management and Market Access An important financial objective of Sony is to maintain the strength of its financial condition, while securing adequate liquidity for business activities. Sony defines its liquidity sources as the amount of cash and cash equivalents (“cash balance”) (excluding restrictions on capital transfers mainly due to national regulations) and the unused amount of committed lines of credit. Funding requirements that arise from maintaining liquidity are principally covered by cash flow from operating and investing activities (including asset sales) and by the available cash balance; however, Sony also raises funds as needed from financial and capital markets through means such as corporate bonds, commercial paper (“CP”) and bank loans. Sony Group Corporation, Sony Global Treasury Services Plc (“SGTS”), a finance subsidiary in the U.K. and Sony Capital Corporation (“SCC”), a finance subsidiary in the U.S., maintain CP programs with access to the Japanese, U.S. and European CP markets. The borrowing limits under these CP programs, translated into yen, were 1,166.3 billion yen in total for Sony Group Corporation, SGTS and SCC as of March 31, 2023. There were no amounts outstanding under the CP programs as of March 31, 2023. If disruption and volatility occur in financial and capital markets and Sony becomes unable to raise sufficient funds from these sources, Sony may also draw down funds from contractually committed lines of credit from various financial institutions. Sony has a total, translated into yen, of 641.5 billion yen in unused committed lines of credit, as of March 31, 2023. Details of those committed lines of credit are: a 275.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, a 1.7 billion U.S. dollarmulti-currency committed line of credit also contracted with a syndicate of Japanese banks and a 1,050 million U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks. Sony currently believes that it can sustain sufficient liquidity through access to committed lines of credit with financial institutions, together with its available cash balance, even in the event that financial and capital markets become illiquid. Sony considers one of management’s top priorities to be the maintenance of stable and appropriate credit ratings in order to ensure financial flexibility for liquidity and capital management and continued adequate access to sufficient funding resources in the financial and capital markets. However, in the event of a downgrade in Sony’s credit ratings, there are no financial covenants in any of Sony’s material financial agreements with financial institutions that would cause an acceleration of the obligation. Even though the cost of borrowing for some committed lines of credit could change according to Sony’s credit ratings, there are no financial covenants that would cause any impairment on the ability to draw down on unused facilities. Sony manages its global cash management activities primarily through Sony Group Corporation in Japan, SCC in the U.S. and SGTS in other regions. The excess or shortage of cash at most of Sony’s subsidiaries is invested or funded by Sony Group Corporation, SGTS and SCC on a net basis, although Sony recognizes that fund transfers are limited in certain countries and geographic areas due to restrictions on capital transactions. In order to pursue more efficient cash management, cash surpluses among Sony’s subsidiaries are deposited with Sony Group Corporation, SGTS and SCC, and cash shortfalls among subsidiaries are covered by loans through Sony Group Corporation, SGTS and SCC, so that Sony can make use of excess cash balances and reduce third-party borrowings. Where local restrictions prevent an efficient intercompany transfer of funds, Sony’s intent is that cash balances remain outside of Sony Group Corporation, SGTS and SCC and that Sony meets its liquidity needs through ongoing cash flows, external borrowings, or both. Sony does not expect restrictions of capital transactions on amounts held outside of Japan to have a material effect on Sony’s overall liquidity, financial condition or results of operations.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Banking business in the Financial Services segment In the banking business in the Financial Services segment, by formulating and conforming with liquidity risk management policies, Sony manages a variety of liquidity risks. Sony defines liquidity risk as cash flow risk and market liquidity risk. Cash flow risk is the risk associated with losses due to Sony’s inability to make cash payments because of a failure to maintain sufficient cash reserves at settlement, as well as risks associated with losses if Sony is forced to raise funds under unfavorable conditions in order to fulfill cash payment obligations. The levels of cash flow risks are classified into phases based on the degree of pressure, and methods of risk management and reporting are set out for each phase, while guidelines are formulated and reviewed as necessary. Market liquidity risk is the risk associated with losses due to Sony’s inability to conduct market transactions, in particular due to an inability to unwind its market position at a given time, or due to Sony being forced to complete transactions under unfavorable market conditions, due to market turmoil or other factors. To manage market liquidity risk, Sony works to understand market liquidity conditions that pertain to the types of products it handles. Sony formulates and revises guidelines on abasis, as necessary. To manage liquidity risk and ensure a robust liquidity buffer, Sony carries out stress tests regularly. Sony estimates potential cash outflow and determines the required buffer, if the liquidity stress scenario would happen. The liquidity buffer consists of highly liquid assets, such as cash and government bonds, which can be immediately converted to cash even in a liquidity crisis. The aforementioned liquidity risk management is carried out by the risk management division. The division periodically reports risk management conditions to the banking subsidiary’s Board of Directors and Executive Committee. In addition, the banking subsidiary’s internal audit division conducts regular audits. The following table summarizes Sony’s financial liabilities as of March 31, 2022 and 2023. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | Deposits from customers in the banking business *1 | | | 3,004,215 | | | | 3,004,215 | | | | 2,886,361 | | | | 48,676 | | | | 15,860 | | | | 3,038 | | | | 1,186 | | | | 49,094 | | | | | 216,103 | | | | 218,676 | | | | 36,976 | | | | 25,363 | | | | 40,326 | | | | 20,303 | | | | 35,243 | | | | 60,465 | | | | | 2,670,156 | | | | 2,687,135 | | | | 2,053,340 | | | | 58,767 | | | | 76,434 | | | | 115,460 | | | | 23,813 | | | | 359,321 | | | | | — | | | | 33,587 | | | | 33,587 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 72,120 | | | | 72,118 | | | | 66,017 | | | | 688 | | | | 718 | | | | 753 | | | | 721 | | | | 3,221 | | Guarantee deposits received | | | 39,296 | | | | 39,296 | | | | 28,872 | | | | 345 | | | | 27 | | | | 8 | | | | 8 | | | | 10,036 | | Redeemable noncontrolling interests | | | 34,995 | | | | 37,046 | | | | 2,435 | | | | 19,927 | | | | 9,046 | | | | 2,381 | | | | — | | | | 3,257 | |
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| | | | 465,349 | | | 511,883 | | | | 81,421 | | | | 69,791 | | | | 59,214 | | | | 45,063 | | | | 37,363 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 35,841 | | | | 32,369 | | | | 30,593 | | | | 27,864 | | | | 19,913 | | | | 72,451 | |
*1 | Demand deposits are included in selling, generalthe “Within 1 year” category. |
*2 | Breakdown of net settlements and administrative expenses. An exception to this isgross settlements in the Pictures segment where such costsderivative liabilities are charged to cost of sales as they are an integral part of producing and distributing motion pictures and television programming. All other costs related to Sony’s distribution networkpresented below. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 72,118 | | | | 66,017 | | | | 688 | | | | 718 | | | | 753 | | | | 721 | | | | 3,221 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
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| | | | | Deposits from customers in the banking business *1 | | | 3,306,981 | | | | 3,316,556 | | | | 3,171,377 | | | | 30,215 | | | | 14,933 | | | | 1,060 | | | | 2,410 | | | | 96,561 | | | | | 349,332 | | | | 354,169 | | | | 26,039 | | | | 40,986 | | | | 110,862 | | | | 35,591 | | | | 80,416 | | | | 60,275 | | | | | 2,988,994 | | | | 3,025,480 | | | | 1,998,315 | | | | 70,690 | | | | 147,447 | | | | 270,268 | | | | 62,571 | | | | 476,189 | | | | | — | | | | 35,831 | | | | 35,831 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 34,123 | | | | 33,766 | | | | 28,886 | | | | 623 | | | | 1,041 | | | | 912 | | | | 918 | | | | 1,386 | | Guarantee deposits received | | | 40,568 | | | | 40,568 | | | | 31,085 | | | | 272 | | | | 19 | | | | 58 | | | | 13 | | | | 9,121 | | Redeemable noncontrolling interests | | | 47,326 | | | | 48,616 | | | | — | | | | 24,844 | | | | 10,397 | | | | 4,572 | | | | 198 | | | | 8,605 | |
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| | | | 532,246 | | | 593,967 | | | | 90,244 | | | | 80,476 | | | | 68,143 | | | | 55,189 | | | | 47,665 | | |
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| | | | | | | 56,603 | | | | 37,539 | | | | 34,588 | | | | 25,798 | | | | 18,384 | | | | 79,338 | |
*1 | Demand deposits are included in costthe “Within 1 year” category. |
*2 | Breakdown of sales, including inbound freight charges, purchasingnet settlements and receiving costs, inspection costs and warehousing costs for raw materials andin-process
inventory. Shipping and handling activities that occur after control ofgross settlements in the related good transfersderivative liabilities are treated as separate performance obligations. Amounts paid by customers for shipping and handling costs are included in sales.presented below. |
(23) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 32,881 | | | | 27,820 | | | | 769 | | | | 1,076 | | | | 912 | | | | 918 | | | | 1,386 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 29,092 | | | | 25,894 | | | | 156 | | | | 3,042 | | | | — | | | | — | | | | — | | | | | 29,977 | | | | 26,960 | | | | 10 | | | | 3,007 | | | | — | | | | — | | | | — | |
| Income taxes -For foreign exchange risk inherent in the insurance business, which is included in the Financial Services segment, refer to Note 13. For foreign exchange risk inherent in the banking business, which is included in the Financial Services segment, refer to (7) Market risks for the banking business. Risk management policy and exposure Costs and prices of products and services in transactions denominated in foreign currencies are affected by currency exchange rate fluctuation, which may have adverse impacts on Sony’s business, operating results, and
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES financial condition. Sony seeks to reduce its exposure to foreign exchange risk mainly by using derivatives such as currency forward contracts or investing in securities denominated in the same currency.
The net amount of Sony’s exposure to foreign exchange risk mainly includes the following. Foreign exchange risk exposures that are mitigated by the use of derivatives are excluded. | | | | | | | | | | | | | | | | | | | | | | | | | | | (6,384 | ) | | | 45,316 | | | | | (22,713 | ) | | | 1,459 | |
Income taxes consist of current and deferred taxes. Current and deferred taxes are recognized in profit or loss, except to the extent that the tax arises from a business combination, or a transaction or event which is recognized, in the same or a different period, outside profit or loss, either in other comprehensive income or directly in equity.
Current taxes are computed based on taxable profit or loss for the year, using the tax rates enacted or substantively enacted at the end of the reporting period.
Deferred tax assets and liabilities are recognized for temporary differences between the tax bases of assets and liabilities and their carrying amounts at the end of the reporting period. Deferred tax liabilities include the liabilities being recognized for undistributed profits of subsidiaries and associates accounted for under the equity method that are expected to be remitted in the foreseeable future. Deferred income taxes are determined using tax rates and laws that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise from the initial recognition of an asset or liability in a transaction which is not a business combination and which, at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the assets can be utilized. Accordingly, the valuation of the deferred tax assets is assessed periodically with available evidence related to the recoverability of the deferred tax assets. Management’s judgment related to this assessment considers the nature, frequency and severity of current and cumulative losses on an individual tax jurisdiction basis, forecasts of future profitability after consideration of uncertain tax positions, excess of appreciated asset value over the tax basis of net assets, the duration of statutory carryforward periods, the past utilization of net operating loss carryforwards prior to expiration, as well as prudent and feasible tax planning strategies which would be employed by Sony to prevent net operating loss and tax credit carryforwards from expiring unutilized.
Sony records assets and liabilities resulting from uncertain tax positions taken or expected to be taken in a tax return. The amount of income taxes Sony pays is subject to ongoing audits by various taxing authorities, which may result in proposed assessments. In addition, several significant items related to intercompany transfer pricing are currently the subject of negotiations between taxing authorities in different jurisdictions as a result of
* | Net exposures resulting in a liability are presented as negative and net exposures resulting in an asset are presented as positive. |
The table below shows the effects on the income before income taxes regarding the financial instruments denominated in foreign currencies held by Sony as of March 31, 2022 and 2023 if the Japanese yen had strengthened by 10% against the U.S. dollar or euro. If the Japanese yen had weakened by 10% against the U.S. dollar or euro, there would be an opposite impact on income before income taxes in the same amount. This analysis was performed based on the assumption that all other variables stay the same. Risk management policy and exposure Sony is exposed to credit risk in relation to its customers with outstanding trade receivables and the financial institutions who are the counterparties of derivative instruments that Sony holds to hedge the foreign exchange risk related to such trade receivables. In order to manage risks inherent in trade receivables, Sony assesses management conditions and creditworthiness of prospective customers and sets credit limits before commencement of business in accordance with Sony’s internal rules regarding credit management. After commencement of business, in accordance with Sony’s internal rules regarding receivable management, Sony seeks to promptly identify and mitigate the risk of uncollectible receivables due to deterioration in the financial conditions of customers by managing payment due dates and outstanding balances by customer, consistently reviewing the status of transactions, payment history, and trends in the outstanding balance of customers, and actively monitoring their management and business conditions. Sony makes judgments about the creditworthiness of customers based on past collection experience, the current conditions, forecasts of future economic conditions and ongoing credit risk evaluations when calculating the loss allowances for the expected credit losses from trade receivables. In addition, the credit risk inherent in derivative transactions is considered low since Sony enters into derivative transactions only with financial institutions with high creditworthiness or central clearing house counterparties, and such derivative transactions are collateralized. The Financial Services segment formulates Fundamental Principles for Risk Management and manages risks depending on its subsidiaries’ size, characteristics and business. Risk Management Guidelines in the Financial Services segment establish a detailed framework for risk management, and each of the subsidiaries in the Financial Services segment has developed a framework for risk management on its own depending on the
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES characteristics of financial assets, including issuer credit risk on debt securities, counterparty risks, credit screenings, the management of credit information, credit ratings, the setting of guarantees or collateral and handling of problem assets on abasis. Relevant departments of subsidiaries in the Financial Services segment periodically report risk management conditions to their Boards of Directors and their Executive Committees. (a) | Changes in the loss allowances |
Trade and other receivables, and contract assets includingnon-current other receivables in the Pictures segment | | | | | | | | | | | | | | | Lifetime expected credit losses | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 30,066 | | | | 31,341 | | | | | | | | | | | Changes due to financial assets recognized at beginning of the fiscal year: | | | | | | | | | — Financial assets that have been derecognized | | | (935 | ) | | | (4,568 | ) | New financial assets originated or purchased | | | 5,998 | | | | 6,401 | | | | | (9,501 | ) | | | (6,647 | ) | Changes in models/risk parameters | | | 4,269 | | | | (1,409 | ) | Foreign exchange and other movements | | | 1,444 | | | | 2,416 | | | | | | | | | | | Balance at end of the fiscal year | | | 31,341 | | | | 27,534 | | | | | | | | | | | | | | | | | | | | | | | | | | 12-month expected credit losses * | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 29 | | | | 53 | | | | | | | | | | | Changes due to financial assets recognized at beginning of the fiscal year: | | | | | | | | | — Financial assets that have been derecognized | | | (6 | ) | | | (4 | ) | New financial assets originated or purchased | | | 44 | | | | 13 | | Changes in models/risk parameters | | | (14 | ) | | | (1 | ) | Foreign exchange and other movements | | | — | | | | — | | | | | | | | | | | Balance at end of the fiscal year | | | 53 | | | | 61 | | | | | | | | | | |
* | For all debt securities, Sony considers that the credit risk has not increased significantly since initial recognition, and therefore the loss allowance is measured at an amount equal to12-months of expected credit losses. |
Substantially all of the loss allowances for debt securities are for debt securities measured at fair value through other comprehensive income as of March 31, 2022 and 2023.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | 12-month expected credit losses | | | Lifetime expected credit losses | | | | | Balance as of April 1, 2021 | | | 122 | | | | 946 | | | | 1,068 | | Changes due to financial assets recognized as of April 1, 2021: | | | | | | | | | | | | | — Transfer to lifetime expected credit losses | | | (1 | ) | | | 1 | | | | — | | — Transfer to 12-month expected credit losses | | | 103 | | | | (103 | ) | | | — | | — Financial assets that have been derecognized | | | (59 | ) | | | (97 | ) | | | (156 | ) | New financial assets originated or purchased | | | 33 | | | | 17 | | | | 50 | | Changes in models/risk parameters | | | (34 | ) | | | 163 | | | | 129 | | Foreign exchange and other movements | | | — | | | | — | | | | — | | | | | | | | | | | | | | | Balance as of March 31, 2022 | | | 164 | | | | 927 | | | | 1,091 | | | | | | | | | | | | | | | Changes due to financial assets recognized as of March 31, 2022: | | | | | | | | | | | | | — Transfer to lifetime expected credit losses | | | (1 | ) | | | 1 | | | | — | | — Transfer to 12-month expected credit losses | | | 80 | | | | (80 | ) | | | — | | — Financial assets that have been derecognized | | | (6 | ) | | | (285 | ) | | | (291 | ) | New financial assets originated or purchased | | | 51 | | | | 20 | | | | 71 | | Changes in models/risk parameters | | | 25 | | | | 241 | | | | 266 | | Foreign exchange and other movements | | | — | | | | — | | | | — | | | | | | | | | | | | | | | Balance as of March 31, 2023 | | | 313 | | | | 824 | | | | 1,137 | | | | | | | | | | | | | | |
Loans that are credit-impaired as of March 31, 2022 and 2023 were not significant. (b) | Description of collateral held as security and other credit enhancements |
Sony assesses creditworthiness of each customer on an individual project basis. When it is determined to extend credit to a customer, the amount of collateral to be obtained will be based on the credit assessment for the customer by management. Collateral held as security includes, but is not limited to the following: Floating charges on all assets and businesses of the customer Specific or related guarantees Debt guarantees from customers and loan agreements with favorable and unfavorable covenant terms The carrying amount of the financial assets, without taking into account any collateral held or credit enhancements, represents Sony’s maximum exposure to credit risk on these assets. For maximum exposure to credit risk of securities to which impairment requirements in IFRS 9 are not applied without taking into account any collateral held or other credit enhancements, refer to Note 5. In the Financial Services segment, housing loans have sufficient collateral, which results in no significant loss allowance being recognized. In addition, certain securities received as collateral for short-term lending transactions are permitted to be sold or repledged. The fair value of the securities which were not sold or repledged as collateral was 530,589 million yen and 4,691 million yen as of March 31, 2022 and 2023, respectively. None of the securities were sold or repledged as collateral as of March 31, 2022 or 2023. The securities are not recognized in the consolidated statements of financial position until being sold or repledged as collateral.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES (c) | Credit risk exposure by risk rating grades |
Credit risk exposure by risk rating grades as of March 31, 2022 and 2023, is as follows: Trade and other receivables, and contract assets includingnon-current other receivables in the Pictures segment | | | | | | | | | | | | | | | | | | | | | | | | Outstanding receivables by overview period of overdue (Gross carrying amount) | | | | | | | | | Not past due or due within 30 days | | | 1,732,371 | | | | 1,849,112 | | | | | 52,895 | | | | 46,332 | | | | | 45,269 | | | | 63,519 | | | | | | | | | | | | | | 1,830,535 | | | | 1,958,963 | | | | | | | | | | |
Debt securities held in the Financial Services segment are substantially all composed of investment grade debt securities, and, as a financial instrument subject to IFRS 9 impairment requirements,12-month expected losses are recorded. The following table shows an analysis of the gross carrying amount for debt securities measured at amortized cost or at fair value through other comprehensive income based on a credit rating system in the Financial Services segment, which is primarily a composite of external credit ratings as of March 31, 2022 and 2023. | | | | | | | | | | | | | | | | | | | | | | | | Debt securities by credit ratings (Gross carrying amount) | | | | | | | | | | | | 488,275 | | | | 559,271 | | | | | 2,431,758 | | | | 2,807,508 | | | | | 8,560,523 | | | | 8,695,883 | | | | | 12,948 | | | | 9,625 | | | | | 32,422 | | | | 6,434 | | | | | | | | | | | | | | 11,525,926 | | | | 12,078,721 | | | | | | | | | | |
Loans held in the banking business in the Financial Services segment are regularly reassessed by the credit ratings of debtors, and as a financial instrument subject to IFRS 9 impairment requirements,12-month or lifetime expecte d credit losses are recorded depending on whether or not the credit risk has increased significantly since initial recognition or not.
SONY GROUP CORPORATION AND CONSOLI DATED SUBSIDIARIES The following table shows an analysis of the gross carrying amount for loans measured at amortized cost based on credit ratings by debtors in the banking business in the Financial Services segment as of March 31, 2022 and 2023. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,747,406 | | | | 156 | | | | 2,747,562 | | | | 2,532 | | | | 3,423 | | | | 5,955 | | | | 2,753,517 | | | | | 24,522 | | | | 282 | | | | 24,804 | | | | 11 | | | | 85 | | | | 96 | | | | 24,900 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,771,928 | | | | 438 | | | | 2,772,366 | | | | 2,543 | | | | 3,508 | | | | 6,051 | | | | 2,778,417 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,124,410 | | | | 140 | | | | 3,124,550 | | | | 2,173 | | | | 3,350 | | | | 5,523 | | | | 3,130,073 | | | | | 16,852 | | | | 242 | | | | 17,094 | | | | 4 | | | | 74 | | | | 78 | | | | 17,172 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,141,262 | | | | 382 | | | | 3,141,644 | | | | 2,177 | | | | 3,424 | | | | 5,601 | | | | 3,147,245 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* | Normal is defined as borrowers who have strong results and no particular problems with their financial position. |
(d) | Credit risk for debt securities designated to be measured at fair value through profit or loss |
The credit risk exposures for debt securities designated to be measured at fair value through profit or loss were 267,169 million yen, and 188,906 million yen as of March 31, 2022 and 2023, respectively. The change in the fair value attributable to the changes in credit risk was an increase of 1,425 million yen for the fiscal year ended March 31, 2022 and an increase of 509 million yen for the fiscal year ended March 31, 2023. The cumulative changes are 2,026 million yen and 2,535 million yen as of March 31, 2022 and 2023, respectively. | Market risks for the banking business |
In the banking business, by formulating and conforming with market risk management policies, Sony manages the risk of loss for when the value of assets and liabilities (includingoff-balance-sheet items), and income from assets and liabilities could be adversely affected by changes in various market risk factors, such as interest rates, exchange rates and stock prices. Market risk management policies specify details such as risk management methods and procedures. ALM and risk management policies are determined by the banking subsidiary’s Board of Directors. Based on these policies, an ALM committee and a risk management committee typically meet once each month to understand and confirm actual conditions and deliberate future measures and risk conditions. On a daily basis, the risk management division maintains an overall understanding of interest, exchange rates and duration of financial assets and liabilities, and monitors Value at Risk (“VaR”), which quantifies the maximum expected loss which could occur during a given holding period and at a given probability, and interest rate sensitivity analysis, and confirms regulatory compliance. Sony also conducts interest rate swaps and other derivative transactions to hedge against interest and exchange rate fluctuation risks. In the measurement of VaR, the historical method (time period: 250 days, confidence level: 99.0%) is used, and interest rate risk, exchange rate risk, and price risk are measured as the amount of market risk. The total market risk volume as of March 31, 2022 and 2023 was 8,230 million yen and 21,433 million yen, respectively. VaR employs statistical methods to estimate the maximum loss that could occur in a defined period of time in the future based on market fluctuation data for a defined period of time in the past; therefore, VaR may not capture the risk in situations in which the market environment undergoes drastic changes that are unpredictable under normal circumstances.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES pending advance pricing agreement applications and competent authority requests. Sony’s estimate for the potential outcome for any uncertain tax issues is judgmental and requires significant estimates. Sony assesses its income tax positions and records tax benefits and expenses for all years subject to examinations based upon the evaluation(8)
| Effect of the facts, circumstances and information available at that reporting date.IBOR reform |
Due to the reform and replacement of benchmark interest rates such as the London Interbank Offered Rate (“LIBOR”), the use of other interbank offered rates (“IBORs”) has become a priority for global regulators. The use of panel-based LIBOR ceased as of December 2021, except for the use of certain U.S. dollar (“USD”) LIBORs. The1-, 3-, and 6-months panel-based USD LIBOR settings are expected to be abolished and lose their representativeness at the end of June 2023. The overnight and 12 months USD LIBOR settings will permanently cease immediately after June 2023. As of March 31, 2023, Sony has contracts that reference USD LIBOR. As mentioned above, the JPY and GBP IBORs have been abolished on December 31, 2021 and replaced by alternative interest rates such as the Tokyo Overnight Average rate and the Sterling Overnight Index Average. Currently, the Secured Overnight Financing Rate (“SOFR”) is gradually replacing USD LIBOR as a reference rate. There remains key differences between USD LIBOR and SOFR. USD LIBOR is a “term rate,” which means that it is published for a specific borrowing period (such as three months or six months) and is “forward-looking,” because it is published at the beginning of the borrowing period. On the other hand, SOFR is currently a “backward-looking” rate, based on overnight rates from actual transactions, and is published at the end of the borrowing period. Furthermore, LIBOR includes a credit spread over the risk-free rate, while SOFR currently does not include such a spread. To transition existing contracts and agreements that reference USD LIBOR to SOFR, adjustments for term differences and credit differences need to be applied to SOFR, to enable the two benchmark rates to be economically equivalent on transition. As of March 31, 2023, the Alternative Reference Rates Committee, a working group for a transition from USD LIBOR to a more robust reference rate, recommends SOFR instead of LIBOR. However, some market participants are calling for the use of credit sensitive rates (“CSRs”) that include a credit spread, and these rates might be used in addition to SOFR. After 2021, Sony established a LIBOR transition project plan in the banking business. In the initial stages of this transition project, Sony planned for the transition out of LIBOR, including USD LIBOR. As the cessation date for the publication of major tenors of USD LIBOR has been set as the end of June 2023, the transition out of USD LIBOR has not been completed as of March 31, 2023. Sony is continuing to drive the transition project to meet the objective of moving out of LIBOR prior to the cessation date for the publication of USD LIBOR. This transition project considered changes to business processes, risk management and valuation models, as well as managing any related tax and accounting implications. As of March 31, 2023, changes to business processes and risk management are largely complete, except for some valuation model changes. However, some contractual changes, such as securities and derivatives transactions that reference USD LIBOR, have not yet been implemented. Therefore, there is a risk that Sony will not be able to make the necessary contractual changes before the end of June 2023, when the1-, 3-, and6-months panel-based USD LIBOR are abolished. In addition, CSRs, rather than SOFR, might be used as an alternative interest rate for debt securities, which would require the implementation of system changes in a short period of time. To avoid the above risks, Sony communicates closely with its counterparty. Sony is also flexible in responding to systemic issues through collaboration among project members and other departments. Sony has a loan contract and interest swap agreement, related to the loan contract, aiming to manage certain borrowing costs, both of which reference USD LIBOR. From March 31, 2023 to the date of submission of this document, Sony has completed the execution of amendment agreements for the transition to alternative interest rate benchmarks for contracts that used USD LIBOR as a reference rate. | Net income (loss) attributable to Sony Group Corporation’s stockholders per share (“EPS”) -
|
Basic EPS is computed based on the weighted-average number of shares of common stock outstanding during each period. The computation of diluted EPS reflects the maximum possible dilution from conversion, exercise, or contingent issuance of securities. All potentially dilutive securities are excluded from the calculation in a situation where there is a net loss attributable to Sony Group Corporation’s stockholders.
| New accounting standards and interpretations not yet adopted
|
Major new or amended standards and interpretations that have been issued as of the date of approval of the consolidated financial statements which are not effective and have not yet been adopted by Sony as of March 31, 2022 are as follows:
IFRS 17 “Insurance Contracts”
The IASB issued IFRS 17 “Insurance Contracts” (“IFRS 17”) in May 2017 and Amendments to IFRS 17 in June 2020. IFRS 17 replaces IFRS 4 and sets out principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of IFRS 17. IFRS 17 provides a general model, supplemented by a specific approach for contracts with direct participation features (the variable fee approach) and a simplified approach (the premium allocation approach) mainly for short-duration contracts. The main features of IFRS 17 are:
a. the measurement of the present value of future cash flows incorporating an explicit risk adjustment, remeasured at each reporting period;
b. a contractual service margin in the fulfilment cash flows representing the unearned profit of the insurance contracts to be recognized in profit or loss over the coverage period;
c. the presentation of insurance revenue and insurance service expenses in the statement of comprehensive income based on the concept of insurance services provided during the period; and
d. extensive disclosures to provide information on the recognized amounts from insurance contracts and the nature and extent of risks arising from these contracts.
IFRS 17 will be effective for Sony as of April 1, 2023. On transition Sony is required to apply IFRS 17 retrospectively unless such application is impracticable. If it is impracticable to apply IFRS 17 retrospectively for a group of insurance contracts, either the modified retrospective approach, which uses reasonable and supportable information, or the fair value approach, which uses the fair value as of the transition date for IFRS 17, may be applied. If Sony cannot obtain reasonable and supportable information necessary to apply the modified retrospective approach, Sony will apply the fair value approach. Applying IFRS 17 is expected to affect measurements of insurance-related accounts, which are currently included in future insurance policy benefits and other, policyholders’ account in the life insurance business and deferred insurance acquisition costs in the consolidated statements of financial position. The impact of IFRS 17 on Sony’s results of operations and financial position is being evaluated.
Amendments to IAS 1 “Presentation of Financial Statements”
In January 2020, the IASB issued “Classification of Liabilities as Current orNon-current”
(“Amendments to IAS 1”). The amendments clarify the right to defer settlement, which is one of the existing requirements when classifying a liability to current ornon-current.
The amendments will be effective for Sony as of April 1, 2023. However, in November 2021, the IASB published an Exposure Draft with proposed revisions to the Amendments to IAS 1 and a proposed deferral of the effective date. The impact of the amendments on Sony’s results of operations and financial position is being evaluated.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The following table contains details of all of the financial instruments that Sony holds at March 31, 2023 which reference USD LIBOR and SOFR and have not yet transitioned to SOFR or an alternative interest rate benchmark: | Business segment information | | | | | | | | | | | | | | | | | | | | | |
have yet to transition to an alternative benchmark interest rate | | | | | | | | | | | Financial assets required to be measured at FVOCI | | | 18,529 | | | | 3,291 | | Financial assets required to be measured at AC | | | 290,178 | | | | 223,111 | | | | | (159,918 | ) | | | (159,918 | ) | | | | 35,483 | | | | 34,375 | | | | | | | | | | | | | | 184,272 | | | | 100,859 | | | | | | | | | | |
|
* | The reportable segments presented below are the segments of Sony for which separate financial information is available and for which operating income or loss amounts are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM does not evaluate segments using discrete asset information. Sony’s CODM is its Chairman, President and Chief Executive Officer.
Due to organizational changes as of April 1, 2021, from the first quarter of the fiscal year ended March 31, 2022, Sony transferred some of the businesses and functions previously included within All Other and Corporate and elimination to the EP&S segment. In connection with these organizational changes, sales and financial services revenue and operating income (loss) of each segment for the fiscal year ended March 31, 2021Derivatives are presented to conform to the organizational structure for the fiscal year ended March 31, 2022.on a net basis.
The G&NS segment includes the network services businesses, the manufacture and sales of home gaming products and the production and sales of software. The Music segment includes the Recorded Music, Music Publishing and Visual Media and Platform businesses. The Pictures segment includes the Motion Pictures, Television Productions and Media Networks businesses. The EP&S segment includes the Televisions business, the Audio and Video business, the Still and Video Cameras business, the smartphone business and the internet-related service business. The I&SS segment includes the image sensors business. The Financial Services segment primarily represents individual life insurance andnon-life
insurance businesses in the Japanese market and the banking business in Japan. All Other consists of various operating activities, including the disc manufacturing and recording media businesses. Sony’s products and services are generally unique to a single operating segment. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Segment sales and financial services revenue:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Sales and financial services revenue: | | | | | | | | | Game & Network Services — | | | | | | | | | | | | 2,604,713 | | | | 2,674,356 | | | | | 51,565 | | | | 65,407 | | | | | | | | | | | | | | 2,656,278 | | | | 2,739,763 | | | | | | | | | | | | | | 927,250 | | | | 1,100,532 | | | | | 12,617 | | | | 16,417 | | | | | | | | | | | | | | 939,867 | | | | 1,116,949 | | | | | | | | | | | | | | 751,800 | | | | 1,236,399 | | | | | 1,187 | | | | 2,512 | | | | | | | | | | | | | | 752,987 | | | | 1,238,911 | | Electronics Products & Solutions — | | | | | | | | | | | | 2,016,887 | | | | 2,297,886 | | | | | 51,200 | | | | 41,300 | | | | | | | | | | | | | | 2,068,087 | | | | 2,339,186 | | Imaging & Sensing Solutions — | | | | | | | | | | | | 937,859 | | | | 992,200 | | | | | 74,638 | | | | 84,224 | | | | | | | | | | | | | | 1,012,497 | | | | 1,076,424 | | | | | | | | | | | | | | 1,664,991 | | | | 1,524,811 | | | | | 9,011 | | | | 9,018 | | | | | | | | | | | | | | 1,674,002 | | | | 1,533,829 | | | | | | | | | | | | | | 84,202 | | | | 82,264 | | | | | 16,534 | | | | 16,519 | | | | | | | | | | | | | | 100,736 | | | | 98,783 | | Corporate and elimination | | | (205,793 | ) | | | (222,332 | ) | | | | | | | | | | | | | 8,998,661 | | | | 9,921,513 | | | | | | | | | | |
G&NS intersegment amounts primarily consist of transactions with the EP&S segment. EP&S intersegment amounts primarily consist of transactions with the G&NS segment. I&SS intersegment amounts primarily consist of transactions with the G&NS segment and the EP&S segment. Corporate and elimination includes certain brand and patent royalty income.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | 341,718 | | | | 346,089 | | | | | 184,786 | | | | 210,933 | | | | | 79,851 | | | | 217,393 | | Electronics Products & Solutions | | | 127,859 | | | | 212,942 | | Imaging & Sensing Solutions | | | 145,884 | | | | 155,597 | | | | | 154,765 | | | | 150,111 | | | | | 7,178 | | | | 17,981 | | | | | | | | | | | | | | 1,042,041 | | | | 1,311,046 | | Corporate and elimination | | | (86,786 | ) | | | (108,707 | ) | | | | | | | | | | Consolidated operating income | | | 955,255 | | | | 1,202,339 | | | | | 83,792 | | | | 19,304 | | | | | (41,082 | ) | | | (104,140 | ) | | | | | | | | | | Consolidated income before income taxes | | | 997,965 | | | | 1,117,503 | | | | | | | | | | |
Operating income (loss) is sales and financial services revenue less costs and expenses, and includes the share of profit (loss) of investments accounted for using the equity method.
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Share of profit (loss) of investments accounted for using the equity method: | | | | | | | | | | | | — | | | | 14 | | | | | 570 | | | | 4,073 | | | | | 123 | | | | (664 | ) | Electronics Products & Solutions | | | 57 | | | | 1,103 | | Imaging & Sensing Solutions | | | (123 | ) | | | (603 | ) | | | | — | | | | — | | | | | 10,924 | | | | 19,723 | | | | | | | | | | | | | | 11,551 | | | | 23,646 | | | | | | | | | | | Depreciation and amortization: | | | | | | | | | | | | 52,987 | | | | 61,219 | | | | | 46,217 | | | | 61,465 | | | | | 290,895 | | | | 396,251 | | Electronics Products & Solutions | | | 82,174 | | | | 91,759 | | Imaging & Sensing Solutions | | | 159,469 | | | | 172,842 | | Financial Services, including deferred insurance acquisition costs | | | 68,598 | | | | 94,169 | | | | | 7,686 | | | | 4,300 | | | | | | | | | | | | | | 708,026 | | | | 882,005 | | | | | 24,085 | | | | 22,465 | | | | | | | | | | | | | | 732,111 | | | | 904,470 | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Sales to customers by product category:
The following table is a breakdown of sales and financial services revenue to external customers by product category for each segment. Sony management views each segment as a single operating segment.
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Sales and financial services revenue: | | | | | | | | | | | | | | | | | | Digital Software and Add-on Content | | | 1,454,654 | | | | 1,424,459 | | | | | 382,950 | | | | 409,355 | | | | | 767,109 | | | | 840,542 | | | | | | | | | | | | | | 2,604,713 | | | | 2,674,356 | | | | | | | | | | | Recorded Music — Streaming | | | 337,100 | | | | 462,368 | | | | | 179,167 | | | | 206,412 | | | | | 156,862 | | | | 200,334 | | Visual Media and Platform | | | 254,121 | | | | 231,418 | | | | | | | | | | | | | | 927,250 | | | | 1,100,532 | | | | | | | | | | | | | | 265,301 | | | | 518,840 | | | | | 267,123 | | | | 419,494 | | | | | 219,376 | | | | 298,065 | | | | | | | | | | | | | | 751,800 | | | | 1,236,399 | | Electronics Products & Solutions | | | | | | | | | | | | 709,007 | | | | 858,837 | | | | | 313,975 | | | | 326,704 | | | | | 338,694 | | | | 414,898 | | | | | 358,580 | | | | 365,864 | | | | | 296,631 | | | | 331,583 | | | | | | | | | | | | | | 2,016,887 | | | | 2,297,886 | | Imaging & Sensing Solutions | | | 937,859 | | | | 992,200 | | | | | 1,664,991 | | | | 1,524,811 | | | | | 84,202 | | | | 82,264 | | | | | 10,959 | | | | 13,065 | | | | | | | | | | | | | | 8,998,661 | | | | 9,921,513 | | | | | | | | | | |
In the G&NS segment, Digital Software andAdd-on
Content includes distribution of software titles andadd-on
content through the network by Sony Interactive Entertainment; Network Services includes network services relating to game, video and music content; Hardware and Others includes home gaming consoles, packaged software, peripheral devices and first-party software for third-party platforms. In the Music segment, Recorded Music — Streaming includes the distribution of digital recorded music by streaming; Recorded Music — Others includes the distribution of recorded music by physical media and digital download as well as revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes the production and distribution of animation titles and game applications, and various service offerings for music and visual products. In the Pictures segment, Motion Pictures includes the worldwide production, acquisition and distribution of live-action and animated motion pictures; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks worldwide. In the EP&S segment, Televisions includes LCD and OLED televisions; Audio and Video includesBlu-ray
disc players and recorders, home audio, headphones and memory-based portable audio devices; Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
broadcast; Mobile Communications includes smartphones and an internet-related service business; Other includes display products such as projectors and medical equipment.
Sales and financial services revenue attributed to countries and areas based on location of external customers for the fiscal years ended March 31, 2021 and 2022 andnon-current
assets (property, plant and equipment, ROU assets, goodwill, content assets and other intangible assets) as of April 1, 2020, March 31, 2021 and 2022 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | Sales and financial services revenue: | | | | | | | | | | | | | | | | | | | | 2,965,936 | | | | 2,764,321 | | | | | | | | | 2,147,686 | | | | 2,766,021 | | | | | | | | | 1,817,854 | | | | 1,870,091 | | | | | | | | | 762,766 | | | | 771,006 | | | | | | | | | 861,623 | | | | 1,149,261 | | | | | | | | | 442,796 | | | | 600,813 | | | | | | | | | | | | | | | | | | | | | | 8,998,661 | | | | 9,921,513 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-current assets (property, plant and equipment, assets, goodwill, content assets and other intangible assets): | | | | | | | | | | | | | | | | 1,389,781 | | | | 1,460,029 | | | | 1,592,981 | | | | | 1,328,295 | | | | 1,378,343 | | | | 1,830,602 | | | | | 410,989 | | | | 459,201 | | | | 565,044 | | | | | 27,108 | | | | 27,091 | | | | 34,029 | | | | | 151,108 | | | | 148,467 | | | | 158,030 | | | | | 44,272 | | | | 55,155 | | | | 91,001 | | | | | | | | | | | | | | | | | | 3,351,553 | | | | 3,528,286 | | | | 4,271,687 | | | | | | | | | | | | | | |
Major countries and areas in each geographic segment excluding Japan, United States and China are as follows:
| | | | | United Kingdom, France, Germany, Russia, Spain and Italy | | | India, South Korea, Oceania, Thailand and Malaysia | | | The Middle East/Africa, Brazil, Mexico and Canada |
There are no individually material countries with respect to sales and financial services revenue ornon-current
assets (property, plant and equipment, ROU assets, goodwill, content assets and other intangible assets) included in Europe, Asia-Pacific and Other Areas.Transfers between reportable business segments or geographic areas are made at individually negotiated prices that are intended to reflect a market-based transfer price.
There were no sales or financial services revenue with any single major external customer for the fiscal years ended March 31, 2021 and 2022.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
5.
Invento ries are comprised of the following: | Financial instruments by measurement method
|
The carrying amount of Sony’s assets and liabilities by measurement method as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at amortized cost (“AC”) | | | | | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | | | | | 255,447 | | | | 298,794 | | | | 358,238 | | Housing loans in the banking business | | | 1,919,219 | | | | 2,342,728 | | | | 2,752,985 | | | | | 252,875 | | | | 236,828 | | | | 230,516 | | Trade and other receivables * | | | | | | | | | | | | | | | | 1,180,798 | | | | 1,356,612 | | | | 1,617,323 | | | | | 2,393 | | | | 2,296 | | | | 2,736 | | | | | | | | | | | | | | | | | | 20,705 | | | | 21,165 | | | | 39,223 | | | | | 110,399 | | | | 114,490 | | | | 121,856 | | Non-current other receivables in the Pictures segment | | | 109,012 | | | | 88,111 | | | | 166,279 | | | | | 19,968 | | | | 17,218 | | | | 16,425 | | Financial assets required to be measured at fair value through profit or loss (“FVPL”) | | | | | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | | | | | 894,493 | | | | 1,017,169 | | | | 1,012,057 | | | | | 884,480 | | | | 1,398,097 | | | | 1,798,536 | | | | | | | | | | | | | | | | | | 8,509 | | | | 9,671 | | | | 16,013 | | | | | 86,628 | | | | 182,985 | | | | 120,274 | | | | | 46,464 | | | | 38,913 | | | | 61,023 | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | | | | | 247,289 | | | | 295,314 | | | | 267,169 | | Financial assets required to be measured at fair value through other comprehensive income (“FVOCI”) | | | | | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | | | | | 12,222,667 | | | | 12,113,844 | | | | 12,378,244 | | | | | | | | | | | | | | | | | | 760 | | | | 529 | | | | 522 | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | | | | | 2,907 | | | | 5,754 | | | | 8,016 | | | | | | | | | | | | | | | | | | 54,758 | | | | 340,364 | | | | 303,992 | | | | | | | | | | | | | | | | | | 18,319,771 | | | | 19,880,882 | | | | 21,271,427 | | | | | 1,645,765 | | | | 1,888,572 | | | | 2,130,033 | | | | | 16,674,006 | | | | 17,992,310 | | | | 19,141,394 | |
F-35
| | | | | | | | | | | | | | | | | | | | | | | | | | | 533,612 | | | | 1,028,614 | | | | | 163,206 | | | | 244,140 | | Raw materials, purchased components and supplies | | | 177,189 | | | | 195,288 | | | | | | | | | | | | | | 874,007 | | | | 1,468,042 | | | | | | | | | | |
For the fiscal years ended March 31, 2021, 2022 and 2023 the write-downs of inventories were 73,594 million yen, 80,546 million yen and 110,901 million yen, respectively. For the fiscal years ended March 31, 2021, 2022, and 2023 the amounts of inventories expensed and included in cost of sales were 2,057,248 million yen, 2,495,769 million yen, and 3,317,553 million yen, respectively. Included within these amounts for the fiscal years ended March 31, 2021, 2022 and 2023 were employee benefits expenses of 269,428 million yen, 282,765 million yen and 238,133 million yen, respectively, and depreciation and amortization expenses of 192,760 million yen, 201,860 million yen and 189,230 million yen, respectively. Other cost of sales mainly consists of material costs, subcontractor costs and other professional service
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
* | The amounts of trade and other receivables exclude contract assets within trade and other receivables, and contract assets in the consolidated statements of financial position.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES |
Cash and cash equivalents are excluded from the table above. Refer to Note 27.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at AC | | | | | | | | | | | | | | | | 824,045 | | | | 1,201,747 | | | | 1,976,553 | | Current portion of long-term debt | | | 98,923 | | | | 205,406 | | | | 171,409 | | | | | | | | | | | | | | | | | | 1,139,093 | | | | 1,455,751 | | | | 1,716,316 | | | | | 171,443 | | | | 140,812 | | | | 126,926 | | Deposits from customers in the banking business * | | | 2,440,783 | | | | 2,773,884 | | | | 3,004,215 | | | | | 939,030 | | | | 1,053,636 | | | | 1,203,646 | | Other financial liabilities | | | 60,291 | | | | 47,336 | | | | 63,281 | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | Other financial liabilities | | | | | | | | | | | | | | | | 35,866 | | | | 40,354 | | | | 72,120 | | | | | 5,666 | | | | 6,161 | | | | 21,552 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | Other financial liabilities | | | | | | | | | | | | | Redeemable noncontrolling interests | | | 7,767 | | | | 8,179 | | | | 34,995 | | | | | | | | | | | | | | | | | | 5,722,907 | | | | 6,933,266 | | | | 8,391,013 | | | | | 4,637,043 | | | | 5,740,213 | | | | 6,975,408 | | | | | 1,085,864 | | | | 1,193,053 | | | | 1,415,605 | |
* | Deposits
from customers in the banking business includethe
non-currentportion
thatis
recorded within other financial liabilities in the consolidated statements of financial position.
|
| Financial instruments measured at fair value on a recurring basis
|
The following section describes the valuation techniques used by Sony to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified.
Debt instrumentsInvestments in associates and equity instrumentsjoint ventures
Where quoted prices of financial instruments are available in an active market, these instruments are classified in Level 1 of the fair value hierarchy. Level 1 financial instruments include exchange-traded equity instruments. If quoted market prices are not available for the specific financial instruments or the market is inactive, then fair values are estimated by using pricing models, quoted prices of financial instruments with similar characteristics or discounted cash flows and mainly classified in Level 2 of the fair value hierarchy. Level 2 financial instruments include debt instruments with quoted prices that are not traded as actively as exchange-traded instruments, such as the majority of government bonds and corporate bonds. In certain cases where there is limited activity or less transparency around inputs to the valuation, these instruments are classified within Level 3 of the fair value hierarchy. Level 3 financial instruments primarily include certain private equity investments, investment funds, securitized products which are not classified within Level 1 or Level 2 and domestic and foreign corporate bonds for which quoted prices are not available in a market and where there is less transparency around inputs. Sony estimates the fair value for private equity investments primarily by using comparable company analysis. The price book-value ratio and price earnings ratio of comparable companies are used as significant unobservable inputs in the fair value measurement of equity securities classified as Level 3. The fair value increases (decreases) as price book-value ratio and price earnings ratio of comparable companies
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
rise (decline). Sony estimates the fair value for certain investment funds by using the net asset value. Sony estimates the fair value for securitized products and domestic and foreign corporate bonds for which quoted prices are not available in a market and where there is less transparency around inputs by using third-party information such as indicative quotes from dealers without adjustment or discounted cash flows. For validating the fair values of Level 3 financial instruments, Sony primarily uses internal models which include management judgment or estimation of assumptions that market participants would use in pricing the asset.
Exchange-traded derivatives valued using quoted prices are classified within Level 1 of the fair value hierarchy. However, few classes of derivative contracts are listed on an exchange; thus, the majority of Sony’s derivative positions are valued using internally developed models that use as their basis readily observable market parameters, meaning parameters that are actively quoted and can be validated to external sources, including pricing services. Depending on the types and contractual terms of derivatives, fair value can be modeled using a series of techniques, such as the Black-Scholes option pricing model, which are consistently applied. For derivative products that have been established for some time, Sony uses models that are widely accepted in the financial services industry. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, volatility, and the credit rating of the counterparty. Further, many of these models do not contain a high level of subjectivity as the techniques used in the models do not require significant judgment, and inputs to the model are readily observable from actively quoted markets. Such instruments are generally classified within Level 2 of the fair value hierarchy.
In determining the fair value of Sony’s interest rate swap derivatives, Sony uses the present value of expected cash flows based on market observable interest rate yield curves commensurate with the term of each instrument. For foreign currency derivatives, Sony’s approach is to use forward contract valuation models employing market observable inputs, such as spot currency rates and time value. These derivatives are classified within Level 2 since Sony primarily uses observable inputs in its valuation of its derivative assets and liabilities.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis as of April 1, 2020, March 31, 2021 and 2022 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 162,708 | | | | — | | | | 162,708 | | | | 4,505 | | | | — | | | | 158,203 | | | | — | | Japanese local government bonds | | | — | | | | 600 | | | | — | | | | 600 | | | | — | | | | — | | | | 600 | | | | — | | | | | — | | | | 9,395 | | | | 30 | | | | 9,425 | | | | — | | | | — | | | | 9,395 | | | | 30 | | | | | 24,330 | | | | 155,908 | | | | — | | | | 180,238 | | | | 66 | | | | — | | | | 180,172 | | | | — | | | | | — | | | | 32,157 | | | | 683 | | | | 32,840 | | | | 7,903 | | | | — | | | | 24,254 | | | | 683 | | | | | — | | | | — | | | | 5,787 | | | | 5,787 | | | | — | | | | — | | | | 5,787 | | | | — | | | | | — | | | | 483,613 | | | | 27,791 | | | | 511,404 | | | | — | | | | — | | | | 503,608 | | | | 7,796 | | | | | 958,414 | | | | 9,757 | | | | 2,937 | | | | 971,108 | | | | — | | | | — | | | | 884,480 | | | | 86,628 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 1,604 | | | | — | | | | 1,604 | | | | — | | | | 53 | | | | — | | | | 1,551 | | Foreign exchange contracts | | | 315 | | | | 21,188 | | | | — | | | | 21,503 | | | | — | | | | 21,454 | | | | — | | | | 49 | | | | | 604 | | | | 18,281 | | | | 4,081 | | | | 22,966 | | | | — | | | | 22,966 | | | | — | | | | — | | | | | 391 | | | | — | | | | — | | | | 391 | | | | — | | | | 391 | | | | — | | | | — | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 51,664 | | | | — | | | | 51,664 | | | | 10,011 | | | | — | | | | 41,653 | | | | — | | Japanese local government bonds | | | — | | | | 28,604 | | | | — | | | | 28,604 | | | | 6,822 | | | | — | | | | 21,782 | | | | — | | | | | — | | | | 22,227 | | | | — | | | | 22,227 | | | | 2,607 | | | | — | | | | 19,620 | | | | — | | | | | — | | | | 41,089 | | | | — | | | | 41,089 | | | | 9,618 | | | | — | | | | 31,471 | | | | — | | | | | — | | | | 103,159 | | | | 546 | | | | 103,705 | | | | 19,798 | | | | — | | | | 83,907 | | | | — | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 9,918,197 | | | | — | | | | 9,918,197 | | | | — | | | | — | | | | 9,918,197 | | | | — | | Japanese local government bonds | | | — | | | | 40,569 | | | | — | | | | 40,569 | | | | 8,513 | | | | — | | | | 32,056 | | | | — | | | | | — | | | | 698,188 | | | | 34,569 | | | | 732,757 | | | | 12,167 | | | | — | | | | 720,590 | | | | — | | | | | — | | | | 1,298,020 | | | | — | | | | 1,298,020 | | | | 1,517 | | | | — | | | | 1,296,400 | | | | 103 | | | | | — | | | | 175,670 | | | | 14,541 | | | | 190,211 | | | | 58,010 | | | | — | | | | 131,544 | | | | 657 | | | | | — | | | | 33,383 | | | | 10,290 | | | | 43,673 | | | | — | | | | — | | | | 43,673 | | | | — | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,432 | | | | — | | | | 47,233 | | | | 57,665 | | | | — | | | | — | | | | 2,907 | | | | 54,758 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 994,486 | | | | 13,305,981 | | | | 148,488 | | | | 14,448,955 | | | | 141,537 | | | | 44,864 | | | | 14,110,299 | | | | 152,255 | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 17,679 | | | | — | | | | 17,679 | | | | 483 | | | | 17,196 | | Foreign exchange contracts | | | 226 | | | | 16,110 | | | | — | | | | 16,336 | | | | 14,581 | | | | 1,755 | | | | | 1,476 | | | | — | | | | — | | | | 1,476 | | | | 1,476 | | | | — | | | | | 375 | | | | — | | | | — | | | | 375 | | | | 375 | | | | — | | | | | — | | | | — | | | | 5,666 | | | | 5,666 | | | | 2,640 | | | | 3,026 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interests | | | — | | | | — | | | | 7,767 | | | | 7,767 | | | | — | | | | 7,767 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,077 | | | | 33,789 | | | | 13,433 | | | | 49,299 | | | | 19,555 | | | | 29,744 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 168,281 | | | | — | | | | 168,281 | | | | — | | | | — | | | | 168,281 | | | | — | | Japanese local government bonds | | | — | | | | 600 | | | | — | | | | 600 | | | | — | | | | — | | | | 600 | | | | — | | | | | — | | | | 14,386 | | | | 62 | | | | 14,448 | | | | — | | | | — | | | | 14,386 | | | | 62 | | | | | 30,164 | | | | 183,994 | | | | — | | | | 214,158 | | | | — | | | | — | | | | 214,158 | | | | — | | | | | — | | | | 21,297 | | | | 213 | | | | 21,510 | | | | 5,434 | | | | — | | | | 15,863 | | | | 213 | | | | | — | | | | — | | | | 6,142 | | | | 6,142 | | | | — | | | | — | | | | 6,142 | | | | — | | | | | — | | | | 564,447 | | | | 37,254 | | | | 601,701 | | | | — | | | | — | | | | 592,305 | | | | 9,396 | | | | | 1,555,620 | | | | 22,290 | | | | 3,172 | | | | 1,581,082 | | | | 13,425 | | | | — | | | | 1,384,672 | | | | 182,985 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 12,788 | | | | — | | | | 12,788 | | | | — | | | | 50 | | | | — | | | | 12,738 | | Foreign exchange contracts | | | 3 | | | | 15,688 | | | | — | | | | 15,691 | | | | — | | | | 14,104 | | | | — | | | | 1,587 | | | | | 241 | | | | — | | | | 10,176 | | | | 10,417 | | | | — | | | | 5,278 | | | | — | | | | 5,139 | | | | | 17 | | | | — | | | | — | | | | 17 | | | | — | | | | 17 | | | | — | | | | — | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 65,988 | | | | — | | | | 65,988 | | | | 21,021 | | | | — | | | | 44,967 | | | | — | | Japanese local government bonds | | | — | | | | 26,724 | | | | — | | | | 26,724 | | | | 12,088 | | | | — | | | | 14,636 | | | | — | | | | | — | | | | 16,422 | | | | — | | | | 16,422 | | | | 12,483 | | | | — | | | | 3,939 | | | | — | | | | | — | | | | 17,174 | | | | — | | | | 17,174 | | | | — | | | | — | | | | 17,174 | | | | — | | | | | — | | | | 169,006 | | | | — | | | | 169,006 | | | | 24,700 | | | | — | | | | 144,306 | | | | — | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 9,797,091 | | | | — | | | | 9,797,091 | | | | — | | | | — | | | | 9,797,091 | | | | — | | Japanese local government bonds | | | — | | | | 47,339 | | | | — | | | | 47,339 | | | | 17,536 | | | | — | | | | 29,803 | | | | — | | | | | — | | | | 723,335 | | | | 93,288 | | | | 816,623 | | | | 12,497 | | | | — | | | | 804,126 | | | | — | | | | | — | | | | 1,185,639 | | | | — | | | | 1,185,639 | | | | — | | | | — | | | | 1,185,528 | | | | 111 | | | | | — | | | | 195,992 | | | | 18,066 | | | | 214,058 | | | | 88,412 | | | | — | | | | 125,243 | | | | 403 | | | | | — | | | | 44,105 | | | | 9,402 | | | | 53,507 | | | | — | | | | — | | | | 53,507 | | | | — | | | | | — | | | | 116 | | | | — | | | | 116 | | | | — | | | | — | | | | 101 | | | | 15 | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 241,577 | | | | — | | | | 104,541 | | | | 346,118 | | | | — | | | | — | | | | 5,754 | | | | 340,364 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,827,622 | | | | 13,292,702 | | | | 282,316 | | | | 15,402,640 | | | | 207,596 | | | | 19,449 | | | | 14,622,582 | | | | 553,013 | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 14,962 | | | | — | | | | 14,962 | | | | 694 | | | | 14,268 | | Foreign exchange contracts | | | 128 | | | | 20,105 | | | | — | | | | 20,233 | | | | 20,233 | | | | — | | | | | 986 | | | | 4,171 | | | | — | | | | 5,157 | | | | 5,157 | | | | — | | | | | 2 | | | | — | | | | — | | | | 2 | | | | 2 | | | | — | | | | | — | | | | — | | | | 6,161 | | | | 6,161 | | | | 1,669 | | | | 4,492 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interests | | | — | | | | — | | | | 8,179 | | | | 8,179 | | | | 5,307 | | | | 2,872 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,116 | | | | 39,238 | | | | 14,340 | | | | 54,694 | | | | 33,062 | | | | 21,632 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 368,273 | | | | — | | | | 368,273 | | | | — | | | | — | | | | 368,273 | | | | — | | Japanese local government bonds | | | — | | | | 600 | | | | — | | | | 600 | | | | — | | | | — | | | | 600 | | | | — | | | | | — | | | | 15,350 | | | | 18 | | | | 15,368 | | | | — | | | | — | | | | 15,317 | | | | 51 | | | | | 29,237 | | | | 185,238 | | | | — | | | | 214,475 | | | | — | | | | — | | | | 214,475 | | | | — | | | | | — | | | | — | | | | 117 | | | | 117 | | | | — | | | | — | | | | — | | | | 117 | | | | | — | | | | — | | | | 3,713 | | | | 3,713 | | | | — | | | | — | | | | 3,713 | | | | — | | | | | — | | | | 377,004 | | | | 48,520 | | | | 425,524 | | | | 3 | | | | — | | | | 409,676 | | | | 15,845 | | | | | 1,906,244 | | | | 9,349 | | | | 3,217 | | | | 1,918,810 | | | | — | | | | — | | | | 1,798,536 | | | | 120,274 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 26,795 | | | | — | | | | 26,795 | | | | — | | | | 32 | | | | — | | | | 26,763 | | Foreign exchange contracts | | | — | | | | 30,204 | | | | — | | | | 30,204 | | | | — | | | | 28,147 | | | | — | | | | 2,057 | | | | | — | | | | — | | | | 4,024 | | | | 4,024 | | | | — | | | | 3,669 | | | | — | | | | 355 | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 48,711 | | | | — | | | | 48,711 | | | | 4,002 | | | | — | | | | 44,709 | | | | — | | Japanese local government bonds | | | — | | | | 26,612 | | | | — | | | | 26,612 | | | | 5,315 | | | | — | | | | 21,297 | | | | — | | | | | — | | | | 7,228 | | | | — | | | | 7,228 | | | | 3,907 | | | | — | | | | 3,321 | | | | — | | | | | — | | | | 17,598 | | | | — | | | | 17,598 | | | | 1,466 | | | | — | | | | 16,132 | | | | — | | | | | — | | | | 163,395 | | | | 3,625 | | | | 167,020 | | | | 33,690 | | | | — | | | | 133,330 | | | | — | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 9,667,158 | | | | — | | | | 9,667,158 | | | | — | | | | — | | | | 9,667,158 | | | | — | | Japanese local government bonds | | | — | | | | 36,369 | | | | — | | | | 36,369 | | | | 12,435 | | | | — | | | | 23,934 | | | | — | | | | | — | | | | 746,223 | | | | 154,245 | | | | 900,468 | | | | 10,257 | | | | — | | | | 890,211 | | | | — | | | | | — | | | | 1,353,394 | | | | — | | | | 1,353,394 | | | | — | | | | — | | | | 1,353,277 | | | | 117 | | | | | — | | | | 318,699 | | | | 20,837 | | | | 339,536 | | | | 65,000 | | | | — | | | | 274,131 | | | | 405 | | | | | — | | | | 41,982 | | | | 39,859 | | | | 81,841 | | | | — | | | | — | | | | 81,841 | | | | — | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 106,499 | | | | — | | | | 205,509 | | | | 312,008 | | | | — | | | | — | | | | 8,016 | | | | 303,992 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,041,980 | | | | 13,440,182 | | | | 483,684 | | | | 15,965,846 | | | | 136,075 | | | | 31,848 | | | | 15,327,947 | | | | 469,976 | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 7,530 | | | | — | | | | 7,530 | | | | 471 | | | | 7,059 | | Foreign exchange contracts | | | — | | | | 36,582 | | | | — | | | | 36,582 | | | | 36,582 | | | | — | | | | | 11,903 | | | | 16,105 | | | | — | | | | 28,008 | | | | 28,008 | | | | — | | | | | — | | | | — | | | | 21,552 | | | | 21,552 | | | | 1,475 | | | | 20,077 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interests | | | — | | | | — | | | | 34,995 | | | | 34,995 | | | | 2,435 | | | | 32,560 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 11,903 | | | | 60,217 | | | | 56,547 | | | | 128,667 | | | | 68,971 | | | | 59,696 | |
Cash and cash equivalents are excluded from the tables above. Refer to Note 27.
Transfers of debt securities from Level 2 to Level 1 were 900 million yen and 1,953 million yen for the fiscal years ended March 31, 2021 and 2022, respectively, as quoted prices in active markets for certain debt securities became available. Transfers of debt securities from Level 1 to Level 2 were 904 million yen and
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
2,523 million yen for the fiscal years ended March 31, 2021 and 2022, respectively, as quoted prices in active markets for certain debt securities were not available.
Transfers of equity securities from Level 2 to Level 1 were 12,276 million yen for the fiscal year ended March 31, 2022 as quoted prices in active markets for certain equity securities became available. There were 0 transfers of equity securities from Level 2 to Level 1 for the fiscal year ended March 31, 2021.
The valuation techniques used to measure the fair value of assets and liabilities classified as Level 3, significant unobservable inputs, and their range
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There are no associates or joint ventures that are individually material to Sony. The carrying amounts of investments in associates and joint ventures that are not individually material to Sony, as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | Significant unobservable inputs
| | | | | | | | | | | | | | | Financial assets required to be measured at FVOCI
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Discounted cash flow | | | | Credit spread * | | | | 37bp-67bp | | | | 27bp-65bp | | | | 26bp-67bp | | | | | 40bp-280bp | | | | 20bp-130bp | | | | 0bp-170bp | | | | | 110bp-150bp | | | | 100bp-150bp | | | | 100bp-160bp | |
| | | | | | | | | | | | | | | | | | | | | | | | Investments accounted for using the equity method | | | | | | | | | | | | 235,671 | | | | 279,640 | | | | | 32,842 | | | | 45,580 | | | | | | | | | | | | | | 268,513 | | | | 325,220 | | | | | | | | | | |
share of comprehensive income, profit or loss and other comprehensive income, of associates and joint ventures that are not individually material to Sony for the fiscal years ended March 31, 2021, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,086 | | | | 21,920 | | | | 22,637 | | | | | (2,535 | ) | | | 1,726 | | | | 1,812 | | | | | | | | | | | | | | | | | | 11,551 | | | | 23,646 | | | | 24,449 | | | | | | | | | | | | | | | Share of other comprehensive income | | | | | | | | | | | | | | | | 884 | | | | 2,077 | | | | 3,659 | | | | | 1 | | | | 1 | | | | 40 | | | | | | | | | | | | | | | | | | 885 | | | | 2,078 | | | | 3,699 | | | | | | | | | | | | | | | Share of comprehensive income | | | | | | | | | | | | | | | | 14,970 | | | | 23,997 | | | | 26,296 | | | | | (2,534 | ) | | | 1,727 | | | | 1,852 | | | | | | | | | | | | | | | | | | 12,436 | | | | 25,724 | | | | 28,148 | | | | | | | | | | | | | | |
The decrease (increase) in fair value is the result of higher (lower) credit spreads.
For the above assets classified as Level 3, the fair value would not change significantly, even if one or more of the significant unobservable inputs are changed to reflect reasonably possible alternative assumptions.
The changes in fair value of Level 3 assets and liabilities for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 30 | | | | — | | | | — | | | | 32 | | | | — | | | | — | | | | — | | | | — | | | | 62 | | | | | 683 | | | | — | | | | — | | | | 101 | | | | — | | | | — | | | | — | | | | (571 | ) | | | 213 | | | | | 5,787 | | | | — | | | | — | | | | 2,761 | | | | (2,406 | ) | | | — | | | | — | | | | — | | | | 6,142 | | | | | 27,791 | | | | 66 | | | | 62 | | | | 18,232 | | | | (8,566 | ) | | | — | | | | — | | | | (331 | ) | | | 37,254 | | | | | 2,937 | | | | 2,081 | | | | 26 | | | | 1,446 | | | | (2,818 | ) | | | — | | | | (500 | ) | | | — | | | | 3,172 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,081 | | | | 5,554 | | | | 541 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,176 | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 546 | | | | (19 | ) | | | — | | | | — | | | | (527 | ) | | | — | | | | — | | | | — | | | | — | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 34,569 | | | | — | | | | (5,580 | ) | | | 64,299 | | | | — | | | | — | | | | — | | | | — | | | | 93,288 | | | | | 14,541 | | | | 168 | | | | 365 | | | | 6,136 | | | | (7,304 | ) | | | 4,544 | | | | — | | | | (384 | ) | | | 18,066 | | | | | 10,290 | | | | 761 | | | | 75 | | | | — | | | | (3,900 | ) | | | 2,176 | | | | — | | | | — | | | | 9,402 | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 47,233 | | | | — | | | | 25,829 | | | | 35,999 | | | | (1,053 | ) | | | — | | | | (4,559 | ) | | | 1,092 | | | | 104,541 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,666 | | | | 16 | | | | 101 | | | | 2,041 | | | | (1,532 | ) | | | — | | | | — | | | | (131 | ) | | | 6,161 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling | | | 7,767 | | | | 783 | | | | 655 | | | | 1,262 | | | | (2,288 | ) | | | — | | | | — | | | | — | | | | 8,179 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 62 | | | | — | | | | — | | | | 20 | | | | — | | | | — | | | | (34 | ) | | | (30 | ) | | | 18 | | | | | 213 | | | | 5 | | | | — | | | | 10 | | | | — | | | | — | | | | — | | | | (111 | ) | | | 117 | | | | | 6,142 | | | | — | | | | — | | | | — | | | | (2,429 | ) | | | — | | | | — | | | | — | | | | 3,713 | | | | | 37,254 | | | | 5,678 | | | | 394 | | | | 22,079 | | | | (16,885 | ) | | | — | | | | — | | | | — | | | | 48,520 | | | | | 3,172 | | | | (395 | ) | | | (15 | ) | | | 477 | | | | (22 | ) | | | — | | | | — | | | | — | | | | 3,217 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,176 | | | | (6,629 | ) | | | 477 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,024 | | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 337 | | | | — | | | | — | | | | — | | | | 3,288 | | | | — | | | | — | | | | 3,625 | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 93,288 | | | | (1 | ) | | | (13,006 | ) | | | 73,964 | | | | — | | | | — | | | | — | | | | — | | | | 154,245 | | | | | 18,066 | | | | 700 | | | | (5 | ) | | | 12,000 | | | | (9,868 | ) | | | — | | | | — | | | | (56 | ) | | | 20,837 | | | | | 9,402 | | | | 279 | | | | (82 | ) | | | 41,763 | | | | (10,625 | ) | | | 3,166 | | | | (4,044 | ) | | | — | | | | 39,859 | | Financial assets designated to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 104,541 | | | | — | | | | 25,614 | | | | 89,274 | | | | (5,825 | ) | | | 63 | | | | (7,884 | ) | | | (274 | ) | | | 205,509 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,161 | | | | 297 | | | | 1,645 | | | | 15,221 | | | | (1,762 | ) | | | — | | | | — | | | | (10 | ) | | | 21,552 | | Financial liabilities designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling | | | 8,179 | | | | 2,008 | | | | 2,978 | | | | 27,240 | | | | (5,285 | ) | | | — | | | | — | | | | (125 | ) | | | 34,995 | |
*1 | For liability items, gains are presented as negative and losses are presented as positive.
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*2 | Gains (losses) recognized in net income are included in financial services revenue, financial income and financial expenses in the consolidated statements of income.
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*3 | Gains (losses) recognized in other comprehensive income are included in changes in equity instruments measured at fair value through other comprehensive income, changes in debt instruments measured at fair value through other comprehensive income and exchange differences on translating foreign operations in the consolidated statements of comprehensive income.
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*4 | Certain debt and equity securities were transferred to Level 3 because differences between the fair value determined by indicative quotes from dealers and the fair value determined by internally developed prices became significant and the observability of the inputs used decreased.
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*5 | Certain debt and equity securities were transferred from Level 3 because observable market data became available.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The changes in unrealized gains (losses) recognized in net income for Level 3 assets and liabilities held as of March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | — | | | | 5 | | | | | (914 | ) | | | 4,562 | | | | | (652 | ) | | | 98 | | | | | | | | | | | | | | 5,554 | | | | (6,629 | ) | Financial assets designated to be measured at FVPL | | | | | | | | | | | | | | | | | | | | | — | | | | 337 | | Financial assets required to be measured at FVOCI | | | | | | | | | | | | | | | | | | | | | 168 | | | | 700 | | | | | 761 | | | | 238 | | | | | | | | | | | Financial liabilities required to be measured at FVPL | | | | | | | | | | | | — | | | | (513 | ) | Financial liabilities designated to be measured at FVPL | | | | | | | | | Redeemable noncontrolling interests | | | (783 | ) | | | (1,878 | ) |
Gains (losses) recognized in net income are included in financial services revenue, financial income and financial expenses in the consolidated statements of income.
Sony generally elects to designate investments in equity instruments held to promote its businesses and to maintain and enhance the business relationship as financial assets measured at fair value through other comprehensive income based on the purposes of holding the investments.
Equity instruments measured at fair value through other comprehensive income as of April 1, 2020, March 31, 2021 and 2022 comprise the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Marketable equity instruments | | | 10,432 | | | | 241,577 | | | | 106,499 | | Non-marketable equity instruments | | | 47,233 | | | | 104,541 | | | | 205,509 | | | | | | | | | | | | | | | | | | 57,665 | | | | 346,118 | | | | 312,008 | | | | | | | | | | | | | | |
Significant marketable equity instruments measured at fair value through other comprehensive income as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 205,177 | | | | 54,162 | | | | | — | | | | 6,110 | | | | 9,161 | | | | | 3,411 | | | | 8,851 | | | | 8,371 | | | | | — | | | | — | | | | 7,122 | | | | | 1,472 | | | | 4,228 | | | | 6,987 | | | | | — | | | | — | | | | 5,773 | | Chicken Soup for the Soul Entertainment, Inc. | | | — | | | | 4,717 | | | | 5,521 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The balances of thenon-marketable
instruments measured at fair value through other comprehensive income by major sector categories as of April 1, 2020, March 31, 2021 and 2022 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,634 | | | | 52,458 | | | | 148,283 | | | | | 24,806 | | | | 33,579 | | | | 35,406 | | Information technology, Communication and Service *3 | | | 12,363 | | | | 16,416 | | | | 20,327 | |
*1 | Major investments included were as follows:
|
April 1, 2020: Crackle Plus, LLC
March 31, 2021: Epic Games, Inc.
March 31, 2022: Epic Games, Inc. and Scopely, Inc.
*2 | Major investments included Nichia Corporation.
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*3 | Major investments included MBS Media Holdings, Inc.
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In order to enhance the efficiency of using assets held effectively, Sony derecognizes equity instruments measured at fair value through other comprehensive income upon the sale of the investment. Information relating to investments derecognized during the fiscal years ended March 31, 2021 and 2022 is as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Fair value at derecognition | | | 2,644 | | | | 11,015 | | Cumulative amount recognized in other comprehensive income, net of tax * | | | (6,085 | ) | | | 5,784 | | | | | 5 | | | | 70 | |
* | The cumulative amount recognized in other comprehensive income, net of tax,
was transferred to retained earnings upon derecognition of the equity instruments.
|
| Financial instruments measured at amortized cost
|
The fair values by fair value hierarchy level of certain financial instruments that are measured at amortized cost as of April 1, 2020, March 31, 2021 and 2022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 94,062 | | | | — | | | | 94,062 | | | | 72,064 | | Japanese local government bonds | | | — | | | | 2,835 | | | | — | | | | 2,835 | | | | 2,503 | | | | | — | | | | 4,166 | | | | — | | | | 4,166 | | | | 3,634 | | | | | — | | | | 105 | | | | — | | | | 105 | | | | 98 | | | | | — | | | | — | | | | 160,760 | | | | 160,760 | | | | 174,772 | | | | | — | | | | 41 | | | | 2,335 | | | | 2,376 | | | | 2,376 | | Housing loans in the banking business | | | — | | | | 2,161,432 | | | | — | | | | 2,161,432 | | | | 1,919,219 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 2,262,641 | | | | 163,095 | | | | 2,425,736 | | | | 2,174,666 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt including the current portion | | | — | | | | 605,444 | | | | 25,401 | | | | 630,845 | | | | 631,716 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 605,444 | | | | 25,401 | | | | 630,845 | | | | 631,716 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 87,705 | | | | — | | | | 87,705 | | | | 71,420 | | Japanese local government bonds | | | — | | | | 2,010 | | | | — | | | | 2,010 | | | | 1,716 | | | | | — | | | | 3,883 | | | | — | | | | 3,883 | | | | 3,537 | | | | | — | | | | 6,032 | | | | — | | | | 6,032 | | | | 5,907 | | | | | — | | | | — | | | | 211,229 | | | | 211,229 | | | | 211,271 | | | | | — | | | | 41 | | | | 4,902 | | | | 4,943 | | | | 4,943 | | Housing loans in the banking business | | | — | | | | — | | | | 2,559,073 | | | | 2,559,073 | | | | 2,342,728 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 99,671 | | | | 2,775,204 | | | | 2,874,875 | | | | 2,641,522 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt including the current portion | | | — | | | | 794,479 | | | | 55,451 | | | | 849,930 | | | | 857,019 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 794,479 | | | | 55,451 | | | | 849,930 | | | | 857,019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government bonds | | | — | | | | 86,622 | | | | — | | | | 86,622 | | | | 75,634 | | Japanese local government bonds | | | — | | | | 1,963 | | | | — | | | | 1,963 | | | | 1,717 | | | | | — | | | | 3,727 | | | | — | | | | 3,727 | | | | 3,583 | | | | | — | | | | 5,121 | | | | — | | | | 5,121 | | | | 5,047 | | | | | — | | | | — | | | | 269,376 | | | | 269,376 | | | | 271,308 | | | | | — | | | | 41 | | | | 909 | | | | 950 | | | | 949 | | Housing loans in the banking business | | | — | | | | — | | | | 2,837,349 | | | | 2,837,349 | | | | 2,752,985 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 97,474 | | | | 3,107,634 | | | | 3,205,108 | | | | 3,111,223 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt including the current portion | | | — | | | | 841,249 | | | | 60,873 | | | | 902,122 | | | | 909,706 | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 841,249 | | | | 60,873 | | | | 902,122 | | | | 909,706 | | | | | | | | | | | | | | | | | | | | | | |
The table above does not include financial instruments measured at amortized cost whose carrying amounts approximate their fair values mainly due to their short-term nature.
The fair values of long-term debt, including the current portion classified as Level 2, were estimated mainly based on discounted future cash flows using Sony’s current rates for similar liabilities.
Financial instruments classified as Level 3 mainly include housing loans in the banking business, securitized products and certain bonds issued by Sony. In determining the fair value of such financial instruments, Sony uses the present value of expected cash flows based on risk-free interest rate yield curves with certain credit risk. Transfers of housing loans in the banking business to Level 3 occurred primarily due to increases in the significance of unobservable inputs during the fiscal year ended March 31, 2021.
| Income and expenses related to financial instruments in the Financial Services segment
|
Income and expenses related to financial instruments in the Financial Services segment are recorded in financial services revenue and financial services expenses in the consolidated statements of income. Income and expenses related to financial instruments in all segments other than Financial Services segment are recorded in Financial income and Financial expenses in the consolidated statements of income. Refer to Note 24.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The breakdown of income and expenses related to financial instruments in the Financial Services segment for the fiscal years ended March 31, 2021 and 2022 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial instruments required to be measured at FVPL | | | Financial instruments designated to be measured
| | | Financial assets measured at AC | | | Financial liabilities measured at AC | | | Debt instruments measured at FVOCI | | | Equity instruments measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net gains (losses) recognized in profit or loss | | | 412,957 | | | | 4,936 | | | | (14,069 | ) | | | (5,569 | ) | | | 51,194 | | | | — | | | | 449,449 | | | | | — | | | | — | | | | 26,141 | | | | — | | | | 169,072 | | | | — | | | | 195,213 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2 | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | 4,577 | | | | — | | | | — | | | | 4,577 | | Impairment losses (gains) on financial assets | | | — | | | | — | | | | (15 | ) | | | — | | | | 18 | | | | — | | | | 3 | | | | | | | | | | | | | | Financial instruments required to be measured at FVPL | | | Financial instruments designated to be measured
| | | Financial assets measured at AC | | | Financial liabilities measured at AC | | | Debt instruments measured at FVOCI | | | Equity instruments measured at FVOCI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net gains (losses) recognized in profit or loss | | | 225,922 | | | | (6,673 | ) | | | 14,765 | | | | (49,110 | ) | | | 148,813 | | | | — | | | | 333,717 | | | | | — | | | | — | | | | 32,839 | | | | — | | | | 180,006 | | | | — | | | | 212,845 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 85 | | | | 85 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | 3,838 | | | | — | | | | — | | | | 3,838 | | Impairment losses (gains) on financial assets | | | — | | | | — | | | | 19 | | | | — | | | | 24 | | | | — | | | | 43 | |
| Financial risk management
|
Sony uses Return on Equity (“ROE”) as an indicator for capital management.
* | ROE is calculated using equity attributable to Sony Group Corporation’s stockholders.
|
Sony manages capital separately for the Financial Services segment and the Sony Group without the Financial Services segment because certain subsidiaries in the Financial Services segment are subject to the below restrictions. Sony also refers to the ratio of stockholders’ equity to total assets of the Sony Group without the Financial Services segment to ensure financial soundness.
The subsidiaries in the Financial Services segment are required to maintain the capital adequacy ratio and net assets at a certain level or higher based on the Insurance Business Act and the Banking Act in Japan. Material requirements which the subsidiaries in the Financial Services segment are subject to are as follows:
Insurance business: Maintain solvency margin ratio
The life insurance subsidiary and thenon-life
insurance subsidiary have maintained a high solvency margin ratio, relative to the Japanese domestic minimum solvency margin ratio requirements.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Banking business: Maintain capital adequacy ratio
The banking subsidiary has maintained a capital adequacy ratio relative to the Japanese domestic criteria.
Lending and borrowing between subsidiaries in the Financial
segment and the other companies within Sony Group is strictly limited. The carrying amounts of total assets of Sony Financial Group Inc. (“SFGI”) as of April 1, 2020, March 31, 2021 and 2022 are 17,933,587 million yen, 19,339,517 million yen and 20,974,027 million yen, respectively. Total liabilities of SFGI as of April 1, 2020, March 31, 2021 and 2022 are 14,876,992 million yen, 16,408,036 million yen and 18,392,874 million yen, respectively. On October 1, 2021, SFGI changed its company name from Sony Financial Holdings Inc. (“SFH”).
For interest rate risk inherent in the insurance business, which is included in the Financial Services segment, refer to Note 13. For interest rate risk inherent in the banking business, which is included in the Financial Services segment, refer to (7) Market risks for subsidiary in the banking business.
Risk management policy and exposure
Interest rate risk is the risk the fair value of a financial instrument or future cash flows of the financial instrument will fluctuate because of changes in market interest rates.
Sony without the Financial Services segment is exposed to interest rate risk that is mainly related to its liabilities such as short-term borrowings and long-term debt as well as bonds. The amount of interest will be affected by changes in market interest rates; therefore, Sony is exposed to the interest rate risk that the future cash outflows for interest payments will fluctuate.
Sony raises funds by issuing fixed-rate bonds in order to avoid an increase in future interest payments that is mainly resulting from an increase in interest rates.
Also, Sony utilizes interest rate swap agreements to reduce funding costs, to diversify sources of funding, and to hedge the downside risk on borrowings and debt securities resulting from unfavorable fluctuations of interest rates and currency exchange rates, and from changes in the fair value of financial instruments. Therefore, the interest risk associated with cash flows of Sony without the Financial Services segment is not significant.
For price risk inherent in the insurance business, which is included in the Financial Services segment, refer to Note 13. For price risk inherent in the banking business, which is included in the Financial Services segment, refer to (7) Market risks for a subsidiary in the banking business.
Risk management policy and exposure
Sony is exposed to securities price risk inherent in holding of equities in other entities in Japan and overseas countries. Sony periodically assesses fair values of equity instruments and the financial conditions of the issuers of such equity instruments, and reviews its portfolio on a regular basis.
Price sensitivity analysis
The table below shows the effects on income before income taxes and other comprehensive income (before considering the tax effects) as of April 1, 2020, March 31, 2021 and 2022 if market prices of marketable equity instruments (e.g., stocks) had decreased by 10%.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income before income taxes | | | (8,439 | ) | | | (17,930 | ) | | | (11,604 | ) | Other comprehensive income (before considering the tax effects) | | | (769 | ) | | | (23,598 | ) | | | (9,871 | ) |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
For liquidity risk inherent in the insurance business, which is included in the Financial Services segment, refer to Note 13. This section does not include information regarding the insurance business other than maturity analysis for financial liabilities.
The description below covers basic financial policy and figures for Sony’s consolidated operations except for the Financial Services segment and certain subsidiaries, which secure liquidity on their own. Furthermore, the banking business in the Financial Services segment is described separately at the end of this section.
Liquidity Management and Market Access
An important financial objective of Sony is to maintain the strength of its financial condition, while securing adequate liquidity for business activities. Sony defines its liquidity sources as the amount of cash and cash equivalents (“cash balance”) (excluding restrictions on capital transfers mainly due to national regulations) and the unused amount of committed lines of credit. Funding requirements that arise from maintaining liquidity are principally covered by cash flow from operating and investing activities (including asset sales) and by the available cash balance; however, Sony also raises funds as needed from financial and capital markets through means such as corporate bonds, commercial paper (“CP”) and bank loans. Sony Group Corporation, Sony Global Treasury Services Plc (“SGTS”), a finance subsidiary in the U.K. and Sony Capital Corporation (“SCC”), a finance subsidiary in the U.S., maintain CP programs with access to the Japanese, U.S. and European CP markets. The borrowing limits under these CP programs, translated into yen, were 1,111.6 billion yen in total for Sony Group Corporation, SGTS and SCC as of March 31, 2022. There were 0 amounts outstanding under the CP programs as of March 31, 2022. If disruption and volatility occur in financial and capital markets and Sony becomes unable to raise sufficient funds from these sources, Sony may also draw down funds from contractually committed lines of credit from various financial institutions. Sony has a total, translated into yen, of 611.4 billion yen in unused committed lines of credit, as of March 31, 2022. Details of those committed lines of credit are: a 275.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, a 1.7 billion U.S. dollar multicurrency committed line of credit also contracted with a syndicate of Japanese banks and a 1,050 million U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks. Sony currently believes that it can sustain sufficient liquidity through access to committed lines of credit with financial institutions, together with its available cash balance, even in the event that financial and capital markets become illiquid. Sony considers one of management’s top priorities to be the maintenance of stable and appropriate credit ratings in order to ensure financial flexibility for liquidity and capital management and continued adequate access to sufficient funding resources in the financial and capital markets. However, in the event of a downgrade in Sony’s credit ratings, there are no financial covenants in any of Sony’s material financial agreements with financial institutions that would cause an acceleration of the obligation. Even though the cost of borrowing for some committed lines of credit could change according to Sony’s credit ratings, there are no financial covenants that would cause any impairment on the ability to draw down on unused facilities.
Sony manages its global cash management activities primarily through Sony Group Corporation in Japan, SCC in the U.S. and SGTS in other regions. The excess or shortage of cash at most of Sony’s subsidiaries is invested or funded by Sony Group Corporation, SGTS and SCC on a net basis, although Sony recognizes that fund transfers are limited in certain countries and geographic areas due to restrictions on capital transactions. In order to pursue more efficient cash management, cash surpluses among Sony’s subsidiaries are deposited with Sony Group Corporation, SGTS and SCC, and cash shortfalls among subsidiaries are covered by loans through Sony Group Corporation, SGTS and SCC, so that Sony can make use of excess cash balances and reduce third-party borrowings. Where local restrictions prevent an efficient intercompany transfer of funds, Sony’s intent is that cash balances remain outside of Sony Group Corporation, SGTS and SCC and that Sony meets its liquidity needs through ongoing cash flows, external borrowings, or both. Sony does not expect restrictions of capital transactions on amounts held outside of Japan to have a material effect on Sony’s overall liquidity, financial condition or results of operations.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Banking business in the Financial Services segment
By formulating and conforming with liquidity risk management policies, the banking subsidiary manages a variety of liquidity risks. The subsidiary defines liquidity risk as cash flow risk and market liquidity risk. Cash flow risk is the risk associated with losses due to the subsidiary’s inability to make cash payments because of a failure to maintain sufficient cash reserves at settlement, as well as risks associated with losses if the subsidiary is forced to raise funds under unfavorable conditions in order to fulfill cash payment obligations. The levels of cash flow risks are classified into phases based on the degree of pressure, and methods of risk management and reporting are set out for each phase, while guidelines are formulated and reviewed as necessary. Market liquidity risk is the risk associated with losses due to the subsidiary’s inability to conduct market transactions, in particular due to an inability to unwind its market position at a given time, or due to the subsidiary being forced to complete transactions under unfavorable market conditions, due to market turmoil or other factors. To manage market liquidity risk, the subsidiary works to understand market liquidity conditions that pertain to the types of products it handles. The subsidiary formulates and revises guidelines on abasis, as necessary. To manage liquidity risk and ensure a robust liquidity buffer, the subsidiary carries out stress tests regularly. The subsidiary estimates potential cash outflow and determines the required buffer, if the liquidity stress scenario would happen. The liquidity buffer consists of highly liquid assets, such as cash and government bonds, which can be immediately converted to cash even in a liquidity crisis. The aforementioned liquidity risk management is carried out by the risk management division. The division periodically reports risk management conditions to the banking subsidiary’s Board of Directors and Executive Committee. In addition, the banking subsidiary’s internal audit division conducts regular audits.The following table summarizes Sony’s financial liabilities as of April 1, 2020, March 31, 2021 and 2022.
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| | | | | Deposits from customers in the banking business *1 | | | 2,440,783 | | | | 2,440,783 | | | | 2,347,387 | | | | 44,351 | | | | 20,295 | | | | 10,504 | | | | 3,247 | | | | 14,999 | | | | | 376,800 | | | | 382,982 | | | | 732 | | | | 100,635 | | | | 129,915 | | | | 15,363 | | | | 40,326 | | | | 96,011 | | | | | 1,078,961 | | | | 1,079,685 | | | | 849,930 | | | | 56,657 | | | | 98,480 | | | | 64,663 | | | | 3,510 | | | | 6,445 | | | | | — | | | | 34,306 | | | | 34,306 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 35,866 | | | | 35,600 | | | | 19,454 | | | | 4,654 | | | | 2,468 | | | | 1,761 | | | | 1,295 | | | | 5,968 | | Guarantee deposits received | | | 47,064 | | | | 47,064 | | | | 36,698 | | | | 328 | | | | 1 | | | | 15 | | | | — | | | | 10,022 | | Redeemable noncontrolling interests | | | 7,767 | | | | 9,539 | | | | — | | | | 5,680 | | | | 1,461 | | | | — | | | | 2,398 | | | | — | |
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| | | | | | | 461,237 | | | | 82,176 | | | | 72,810 | | | | 58,191 | | | | 42,574 | | | | 31,994 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 28,481 | | | | 26,625 | | | | 24,530 | | | | 21,962 | | | | 18,575 | | | | 53,319 | |
*1 | Demand deposits are included in the “Within 1 year” category.
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*2 | Breakdown of net settlements and gross settlements in the derivative liabilities are presented below.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 32,574 | | | | 17,928 | | | | 3,159 | | | | 2,463 | | | | 1,761 | | | | 1,295 | | | | 5,968 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 46,608 | | | | 27,071 | | | | 17,539 | | | | 1,998 | | | | — | | | | — | | | | — | | | | | 49,634 | | | | 28,597 | | | | 19,034 | | | | 2,003 | | | | — | | | | — | | | | — | |
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| | | | | Deposits from customers in the banking business *1 | | | 2,773,884 | | | | 2,773,884 | | | | 2,682,156 | | | | 36,586 | | | | 19,643 | | | | 3,135 | | | | 3,159 | | | | 29,205 | | | | | 330,229 | | | | 333,902 | | | | 100,629 | | | | 51,573 | | | | 25,363 | | | | 40,326 | | | | 20,303 | | | | 95,708 | | | | | 1,728,537 | | | | 1,742,736 | | | | 1,232,687 | | | | 54,699 | | | | 69,691 | | | | 148,361 | | | | 6,866 | | | | 230,432 | | | | | — | | | | 37,322 | | | | 37,322 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 40,354 | | | | 41,415 | | | | 29,660 | | | | 3,260 | | | | 2,103 | | | | 1,289 | | | | 847 | | | | 4,256 | | Guarantee deposits received | | | 31,811 | | | | 31,811 | | | | 21,279 | | | | 365 | | | | 21 | | | | 26 | | | | 275 | | | | 9,845 | | Redeemable noncontrolling interests | | | 8,179 | | | | 10,225 | | | | 5,307 | | | | 872 | | | | — | | | | 1,628 | | | | 2,418 | | | | — | |
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| | | | | | | 444,725 | | | | 84,050 | | | | 68,993 | | | | 57,683 | | | | 39,359 | | | | 31,797 | | |
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| | | | | | | 28,937 | | | | 26,606 | | | | 23,977 | | | | 20,461 | | | | 17,510 | | | | 45,352 | |
*1 | Demand deposits are included in the “Within 1 year” category.
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*2 | Breakdown of net settlements and gross settlements in the derivative liabilities are presented below.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
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| | | | | Deposits from customers in the banking business *1 | | | 3,004,215 | | | | 3,004,215 | | | | 2,886,361 | | | | 48,676 | | | | 15,860 | | | | 3,038 | | | | 1,186 | | | | 49,094 | | | | | 216,103 | | | | 218,676 | | | | 36,976 | | | | 25,363 | | | | 40,326 | | | | 20,303 | | | | 35,243 | | | | 60,465 | | | | | 2,670,156 | | | | 2,687,135 | | | | 2,053,340 | | | | 58,767 | | | | 76,434 | | | | 115,460 | | | | 23,813 | | | | 359,321 | | | | | — | | | | 33,587 | | | | 33,587 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 72,120 | | | | 72,118 | | | | 66,017 | | | | 688 | | | | 718 | | | | 753 | | | | 721 | | | | 3,221 | | Guarantee deposits received | | | 39,296 | | | | 39,296 | | | | 28,872 | | | | 345 | | | | 27 | | | | 8 | | | | 8 | | | | 10,036 | | Redeemable noncontrolling interests | | | 34,995 | | | | 37,046 | | | | 2,435 | | | | 19,927 | | | | 9,046 | | | | 2,381 | | | | — | | | | 3,257 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 465,349 | | | 511,883 | | | | 81,421 | | | | 69,791 | | | | 59,214 | | | | 45,063 | | | | 37,363 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 35,841 | | | | 32,369 | | | | 30,593 | | | | 27,864 | | | | 19,913 | | | | 72,451 | |
*1 | Demand deposits are included in the “Within 1 year” category.
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*2 | Breakdown of net settlements and gross settlements in the derivative liabilities are presented below.
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For foreign exchange risk inherent in the insurance business, which is included in the Financial Services segment, refer to Note 13. For foreign exchange risk inherent in the banking business, which is included in the Financial Services segment, refer to (7) Market risks for subsidiary in the banking business.
Risk management policy and exposure
Costs and prices of products and services in transactions denominated in foreign currencies are affected by currency exchange rate fluctuation, which may have adverse impacts on Sony’s business, operating results, and financial condition. Sony seeks to reduce its exposure to foreign exchange risk mainly by using derivatives such as currency forward contracts or investing in securities denominated inthe
same currency.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
(i) | Foreign exchange risk exposure
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The net amount of Sony’s exposure to foreign exchange risk mainly includes the following. Foreign exchange risk exposures that are mitigated by the use of derivatives are excluded.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (4,533 | ) | | | 5,813 | | | | (6,384 | ) | | | | 286 | | | | 1,877 | | | | (22,713 | ) |
* | Net exposures resulting in a liability are presented as negative and net exposures resulting in an asset are presented as positive.
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The table below shows the effects on the income before income taxes regarding the financial instruments denominated in foreign currencies held by Sony as of April 1, 2020, March 31, 2021 and 2022 if the Japanese yen had strengthened by 10% against the U.S. dollar or euro. If the Japanese yen had weakened by 10% against the U.S. dollar or euro, there would be an opposite impact on income before income taxes in the same amount. This analysis was performed based on the assumption that all other variables stay the same.
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Risk management policy and exposure
Sony is exposed to credit risk in relation to its customers with outstanding trade receivables and the financial institutions who are the counterparties of derivative instruments that Sony holds to hedge the foreign exchange risk related to such trade receivables.
In order to manage risks inherent in trade receivables, Sony assesses management conditions and creditworthiness of prospective customers and sets credit limits before commencement of business in accordance with Sony’s internal rules regarding credit management. After commencement of business, in accordance with Sony’s internal rules regarding receivable management, Sony seeks to promptly identify and mitigate the risk of uncollectible receivables due to deterioration in the financial conditions of customers by managing payment due dates and outstanding balances by customer, consistently reviewing the status of transactions, payment history, and trends in the outstanding balance of customers, and actively monitoring their management and business conditions. Sony makes judgments about the creditworthiness of customers based on past collection experience, the current conditions, forecasts of future economic conditions and ongoing credit risk evaluations when calculating the loss allowances for the expected credit losses from trade receivables.
In addition, the credit risk inherent in derivative transactions is considered low since Sony enters into derivative transactions only with financial institutions with high creditworthiness or central clearing house counterparties, and such derivative transactions are collateralized.
The Financial Services segment formulates Fundamental Principles for Risk Management and manages risks depending on its subsidiaries’ size, characteristics and business. Risk Management Guidelines in the Financial Services segment establish a detailed framework for risk management, and each of the subsidiaries in the Financial Services segment has developed a framework for risk management on its own depending on the characteristics of financial assets, including issuer credit risk on debt securities, counterparty risks, credit screenings, the management of credit information, credit ratings, the setting of guarantees or collateral and handling of problem assets on abasis. Relevant departments of subsidiaries in the Financial Services segment periodically report risk management conditions to their Boards of Directors and their Executive Committees.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
(a) | Changes in the loss allowances
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Trade and other receivables, and contract assets includingnon-current
other receivables in the Pictures segment | | | | | | | | | | | | | | | Lifetime expected credit losses | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 27,108 | | | | 30,066 | | | | | | | | | | | Changes due to financial assets recognized at beginning of the fiscal year: | | | | | | | | | — Financial assets that have been derecognized | | | (2,151 | ) | | | (935 | ) | New financial assets originated or purchased | | | 6,673 | | | | 5,998 | | | | | (5,682 | ) | | | (9,501 | ) | Changes in models/risk parameters | | | 4,066 | | | | 4,269 | | Foreign exchange and other movements | | | 52 | | | | 1,444 | | | | | | | | | | | Balance at end of the fiscal year | | | 30,066 | | | | 31,341 | | | | | | | | | | | | | | | | | | | | | | | | | | 12-month expected credit losses * | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 41 | | | | 29 | | | | | | | | | | | Changes due to financial assets recognized at beginning of the fiscal year: | | | | | | | | | — Financial assets that have been derecognized | | | (11 | ) | | | (6 | ) | New financial assets originated or purchased | | | 12 | | | | 44 | | Changes in models/risk parameters | | | (14 | ) | | | (14 | ) | Foreign exchange and other movements | | | 1 | | | | — | | | | | | | | | | | Balance at end of the fiscal year | | | 29 | | | | 53 | | | | | | | | | | |
* | For all debt securities, Sony considers that the credit risk has not increased significantly since initial recognition, and therefore the loss allowance is measured at an amount equal to12-months
of expected credit losses. |
Substantially all of the loss allowances for debt securities are for debt securities measured at fair value through other comprehensive income as of April 1, 2020, March 31, 2021 and 2022.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | LoansProperty, plant and equipment
| | | | | | | | | | | | | | | | | | | 12-month expected credit losses | | | Lifetime expected credit losses | | | | | Balance as of April 1, 2020 | | | 126 | | | | 936 | | | | 1,062 | | Changes due to financial assets recognized as of April 1, 2020: | | | | | | | | | | | | | — Transfer to lifetime expected credit losses | | | (1 | ) | | | 1 | | | | — | | — Transfer to 12-month expected credit losses | | | 97 | | | | (97 | ) | | | — | | — Financial assets that have been derecognized | | | (30 | ) | | | (121 | ) | | | (151 | ) | New financial assets originated or purchased | | | 27 | | | | 21 | | | | 48 | | Changes in models/risk parameters | | | (98 | ) | | | 208 | | | | 110 | | Foreign exchange and other movements | | | 1 | | | | (2 | ) | | | (1 | ) | | | | | | | | | | | | | | Balance as of March 31, 2021 | | | 122 | | | | 946 | | | | 1,068 | | | | | | | | | | | | | | | Changes due to financial assets recognized as of March 31, 2021: | | | | | | | | | | | | | — Transfer to lifetime expected credit losses | | | (1 | ) | | | 1 | | | | — | | — Transfer to 12-month expected credit losses | | | 103 | | | | (103 | ) | | | — | | — Financial assets that have been derecognized | | | (59 | ) | | | (97 | ) | | | (156 | ) | New financial assets originated or purchased | | | 33 | | | | 17 | | | | 50 | | Changes in models/risk parameters | | | (34 | ) | | | 163 | | | | 129 | | Foreign exchange and other movements | | | — | | | | — | | | | — | | | | | | | | | | | | | | | Balance as of March 31, 2022 | | | 164 | | | | 927 | | | | 1,091 | | | | | | | | | | | | | | |
Loans that are credit-impaired as of April 1, 2020, March 31, 2021 and 2022 were not significant.
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The changes in property, plant and equipment for the fiscal years ended March 31, 2022 and 2023 are as follows: (b) | Description of collateral held as security and other credit enhancements
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Sony assesses creditworthiness of each customer on an individual project basis. When it is determined to extend credit to a customer, the amount of collateral to be obtained will be based on the credit assessment for the customer by management. Collateral held as security includes, but is not limited to the following:
Floating charges on all assets and businesses of the customer
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of April 1, 2021: | | | | | | | | | | | | | | | | | | | | | | | | 76,077 | | | | 755,115 | | | | 1,864,034 | | | | 102,310 | | | | 2,797,536 | | Accumulated depreciation and impairment losses | | | (37 | ) | | | (491,156 | ) | | | (1,314,220 | ) | | | (1,582 | ) | | | (1,806,995 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 76,040 | | | | 263,959 | | | | 549,814 | | | | 100,728 | | | | 990,541 | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | 2,461 | | | | 25,434 | | | | 91,189 | | | | 229,094 | | | | 348,178 | | Acquisitions through business combinations | | | — | | | | 1,946 | | | | 1,437 | | | | — | | | | 3,383 | | | | | 24 | | | | 48,600 | | | | 134,660 | | | | (185,979 | ) | | | (2,695 | ) | Disposals or classified as held for sale *1 | | | (1,628 | ) | | | (2,248 | ) | | | (4,690 | ) | | | (158 | ) | | | (8,724 | ) | | | | — | | | | (29,906 | ) | | | (205,920 | ) | | | — | | | | (235,826 | ) | | | | — | | | | (235 | ) | | | (579 | ) | | | (74 | ) | | | (888 | ) | | | | 1,226 | | | | 9,640 | | | | 7,032 | | | | 1,036 | | | | 18,934 | | | | | — | | | | 282 | | | | 22 | | | | 6 | | | | 310 | | | | | | | | | | | | | | | | | | | | | | | | | | 2,083 | | | | 53,513 | | | | 23,151 | | | | 43,925 | | | | 122,672 | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | 78,160 | | | | 832,785 | | | | 1,953,985 | | | | 145,940 | | | | 3,010,870 | | Accumulated depreciation and impairment losses | | | (37 | ) | | | (515,313 | ) | | | (1,381,020 | ) | | | (1,287 | ) | | | (1,897,657 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 78,123 | | | | 317,472 | | | | 572,965 | | | | 144,653 | | | | 1,113,213 | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | 700 | | | | 17,369 | | | | 112,351 | | | | 364,450 | | | | 494,870 | | Acquisitions through business combinations | | | — | | | | 168 | | | | 2,480 | | | | 5,939 | | | | 8,587 | | | | | 75 | | | | 75,608 | | | | 232,218 | | | | (314,742 | ) | | | (6,841 | ) | Disposals or classified as held for sale *1 | | | (876 | ) | | | (1,610 | ) | | | (2,793 | ) | | | (644 | ) | | | (5,923 | ) | | | | — | | | | (33,682 | ) | | | (234,530 | ) | | | — | | | | (268,212 | ) | | | | — | | | | (317 | ) | | | (570 | ) | | | (52 | ) | | | (939 | ) | | | | 1,232 | | | | 8,931 | | | | 5,315 | | | | 531 | | | | 16,009 | | | | | — | | | | (4,636 | ) | | | (1,264 | ) | | | — | | | | (5,900 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 1,131 | | | | 61,831 | | | | 113,207 | | | | 55,482 | | | | 231,651 | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | | 79,291 | | | | 921,156 | | | | 2,202,010 | | | | 201,299 | | | | 3,403,756 | | Accumulated depreciation and impairment losses | | | (37 | ) | | | (541,853 | ) | | | (1,515,838 | ) | | | (1,164 | ) | | | (2,058,892 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 79,254 | | | | 379,303 | | | | 686,172 | | | | 200,135 | | | | 1,344,864 | | | | | | | | | | | | | | | | | | | | | | |
*1 | SpecificAn asset or related guaranteesdisposal group for which the cash flows are expected to arise principally from sale rather than continuing use is classified to current asset as an asset held for sale.
|
*2 | Debt guarantees from customersDepreciation expenses are allocated to the cost of inventory and loan agreements with favorable and unfavorable covenant terms
The carrying amountare recognized in cost of the financial assets, without taking into account any collateral held or credit enhancements, represents Sony’s maximum exposure to credit risk on these assets. For maximum exposure to credit risk of securities to which impairment requirements in IFRS 9 “Financial Instruments” (“IFRS 9”) are not applied without taking into account any collateral held or other credit enhancements, refer to Note 5.
In the Financial Services segment, housing loans have sufficient collateral, which results in no significant loss allowance being recognized. In addition, certain securities receivedsales as collateral for short-term lending transactions are permitted to beinventory is sold, or repledged. The fair value of the securities which were not sold or repledged as collateral was 373,274 million yenare directly recognized in selling, general and 530,589 million yen as of March 31, 2021administrative expenses and 2022, respectively. None of the securities were sold or repledged as collateral as of March 31, 2021 or 2022. The securities are not recognizedresearch and development expenditures in the consolidated statements of financial position until being sold or repledged as collateral.income, depending on the use of the asset.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES (c) | Credit risk exposure by risk rating grades
|
Credit risk exposure by risk rating grades as of April 1, 2020, March 31, 2021 and 2022, is as follows:
Trade and other receivables, and contract assets includingnon-current
other receivables in the Pictures segment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding receivables by overview period of overdue (Gross carrying amount) | | | | | | | | | | | | | Not past due or due within 30 days | | | 1,223,507 | | | | 1,388,742 | | | | 1,732,371 | | | | | 48,007 | | | | 40,046 | | | | 52,895 | | | | | 61,782 | | | | 56,946 | | | | 45,269 | | | | | | | | | | | | | | | | | | 1,333,296 | | | | 1,485,734 | | | | 1,830,535 | | | | | | | | | | | | | | |
| Debt securities held in the Financial Services segment are substantially all composed of investment grade debt securities, and, as a financial instrument subject to IFRS 9 impairment requirements,12-month
expected losses are recorded.The following table shows an analysis of the gross carrying amount for debt securities measured at amortized cost or at fair value through other comprehensive income based on a credit rating system in the Financial Services segment, which is primarily a composite of external credit ratings as of April 1, 2020, March 31, 2021 and 2022.
|
Sony leases communication and commercial equipment, plant, office space, warehouses, employees’ residential facilities and other assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities by credit ratings (Gross carrying amount) | | | | | | | | | | | | | | | | 233,334 | | | | 282,551 | | | | 488,275 | | | | | 1,540,380 | | | | 2,024,890 | | | | 2,431,758 | | | | | 7,930,999 | | | | 8,259,282 | | | | 8,560,523 | | | | | 19,171 | | | | 17,961 | | | | 12,948 | | | | | 7,628 | | | | 11,017 | | | | 32,422 | | | | | | | | | | | | | | | | | | 9,731,512 | | | | 10,595,701 | | | | 11,525,926 | | | | | | | | | | | | | | |
| Loans held in the banking business in the Financial Services segment are regularly reassessed by the credit ratings of debtors, andassets as a financial instrument subject to IFRS 9 impairment requirements,lessee
|
12-month
or lifetime expected credit losses are recorded depending on whether or not the credit risk has increased significantly since initial recognition or not.
The changes inassets for the fiscal years ended March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of April 1, 2021: | | | | | | | | | | | | | | | | | | | | 15,394 | | | | 327,350 | | | | 15,290 | | | | 358,034 | | | | | | | | | | | | | | | | | | | Changes in the carrying amount | | | | | | | | | | | | | | | | | Increase due to new lease agreements and remeasurement of lease liabilities | | | 2,908 | | | | 104,456 | | | | 12,816 | | | | 120,180 | | Decrease due to termination of lease agreements and remeasurement of lease liabilities | | | (159 | ) | | | (5,685 | ) | | | (356 | ) | | | (6,200 | ) | Depreciation | | | (1,140 | ) | | | (72,944 | ) | | | (7,700 | ) | | | (81,784 | ) | Other | | | 797 | | | | 22,091 | | | | 312 | | | | 23,200 | | | | | | | | | | | | | | | | | | | Net changes | | | 2,406 | | | | 47,918 | | | | 5,072 | | | | 55,396 | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2022: | | | | | | | | | | | | | | | | | | | | 17,800 | | | | 375,268 | | | | 20,362 | | | | 413,430 | | | | | | | | | | | | | | | | | | | Changes in the carrying amount | | | | | | | | | | | | | | | | | Increase due to new lease agreements and remeasurement of lease liabilities | | | 1,533 | | | | 90,395 | | | | 36,604 | | | | 128,532 | | Decrease due to termination of lease agreements and remeasurement of lease liabilities | | | (3,323 | ) | | | (10,654 | ) | | | (214 | ) | | | (14,191 | ) | Depreciation | | | (1,171 | ) | | | (77,368 | ) | | | (7,808 | ) | | | (86,347 | ) | Other | | | 399 | | | | 35,422 | | | | 818 | | | | 36,639 | | | | | | | | | | | | | | | | | | | Net changes | | | (2,562 | ) | | | 37,795 | | | | 29,400 | | | | 64,633 | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2023: | | | | | | | | | | | | | | | | | | | | 15,238 | | | | 413,063 | | | | 49,762 | | | | 478,063 | | | | | | | | | | | | | | | | | | |
| F-Income, expenses, and cash flows (except for depreciation) arising from lease contracts as a lessee and lessor are as follows:
55 |
| | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | | | | | Interest expenses on lease liabilities | | | | | | | 8,223 | | | | 10,382 | | Expenses related to short-term leases accounted for applying an exemption | | | | | | | 19,764 | | | | 36,807 | | | | | | | | | (2,256 | ) | | | (1,784 | ) | Net cash outflows for leases | | | | | | | 83,546 | | | | 89,681 | |
Refer to Note 6 for the maturity analysis of Sony’s financial liabilities including lease liabilities.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The following table shows an analysis of the gross carrying amount for loans measured at amortized cost based on credit ratings by debtors in the banking business in the Financial Services segment as of April 1, 2020, March 31, 202111.
| Goodwill and 2022.intangible assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,916,086 | | | | 205 | | | | 1,916,291 | | | | 1,163 | | | | 2,250 | | | | 3,413 | | | | 1,919,704 | | | | | 43,440 | | | | 666 | | | | 44,106 | | | | 1 | | | | 118 | | | | 119 | | | | 44,225 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,959,526 | | | | 871 | | | | 1,960,397 | | | | 1,164 | | | | 2,368 | | | | 3,532 | | | | 1,963,929 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,337,703 | | | | 128 | | | | 2,337,831 | | | | 1,115 | | | | 4,279 | | | | 5,394 | | | | 2,343,225 | | | | | 34,114 | | | | 486 | | | | 34,600 | | | | 2 | | | | 76 | | | | 78 | | | | 34,678 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,371,817 | | | | 614 | | | | 2,372,431 | | | | 1,117 | | | | 4,355 | | | | 5,472 | | | | 2,377,903 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The changes in goodwill for the fiscal years ended March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | | | | | | | | | | 1,073,178 | | | | 1,312,615 | | | | | (347,069 | ) | | | (359,720 | ) | | | | | | | | | | | | | 726,109 | | | | 952,895 | | | | | | | | | | | Increase (decrease) due to: | | | | | | | | | | | | 197,644 | | | | 274,499 | | Disposals or classified as held for sale * | | | (40,201 | ) | | | (445 | ) | | | | — | | | | — | | | | | 69,343 | | | | 48,163 | | | | | — | | | | — | | Balance at end of the fiscal year | | | | | | | | | | | | 1,312,615 | | | | 1,649,041 | | | | | (359,720 | ) | | | (373,929 | ) | | | | | | | | | | | | | 952,895 | | | | 1,275,112 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,747,406 | | | | 156 | | | | 2,747,562 | | | | 2,532 | | | | 3,423 | | | | 5,955 | | | | 2,753,517 | | | | | 24,522 | | | | 282 | | | | 24,804 | | | | 11 | | | | 85 | | | | 96 | | | | 24,900 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,771,928 | | | | 438 | | | | 2,772,366 | | | | 2,543 | | | | 3,508 | | | | 6,051 | | | | 2,778,417 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* | * | Normal is defined as borrowers who have strong results and no particular problems with their financial position.
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(d) | Credit risk for debt securities designated to be measured at fair value through profit or loss
|
The credit risk exposuresDisposals or classified as held for debt securities designated to be measured at fair value through profit or loss were 247,289 million yen, 295,314 million yen, and 267,169 million yen as of April 1, 2020, March 31, 2021 and 2022, respectively. The change in the fair value attributable to the changes in credit risk
5,045 million yensale for the fiscal year ended March 31, 2021 and
an increase2022 relate mainly to the transfer of
1,425 million yen certain operations of Game Show Network, LLC, a wholly-owned subsidiary in the Pictures segment. Refer to Note 31 for the fiscal year ended March 31, 2022. The cumulative changes are 5,645 million yen, 601 million yen and 2,026 million yen asdetails of April 1, 2020, March 31, 2021 and 2022, respectively.the transfer.
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The carrying amounts of goodwill by segment as of March 31, 2022 and 2023 are as follows: | Market risks for a subsidiary in the banking business
|
| | | | | | | | | | | | | | | | | | | | | | | | Game & Network Services *1 | | | 200,206 | | | | 407,121 | | | | | 539,055 | | | | 579,969 | | | | | 187,658 | | | | 259,055 | | Entertainment, Technology & Services | | | 11,949 | | | | 14,654 | | Imaging & Sensing Solutions | | | 3,193 | | | | 3,479 | | | | | 10,834 | | | | 10,834 | | | | | — | | | | — | | | | | | | | | | | | | | 952,895 | | | | 1,275,112 | | | | | | | | | | |
By formulating and conforming with market risk management policies, a subsidiary in the banking business manages the risk of loss for when the value of assets and liabilities (includingoff-balance-sheet
items), and income from assets and liabilities could be adversely affected by changes in various market risk factors, such as interest rates, exchange rates and stock prices. Market risk management policies specify details such as risk management methods and procedures. ALM and risk management policies are determined by the subsidiary’s
All of the goodwill shown in the G&NS line of the table above is allocated to a group of CGUs which comprise the entire G&NS segment. Intangible assets with indefinite useful lives related to the G&NS business have carrying amounts of 57,217 million yen and 57,409 million yen, as of March 31, 2022 and 2023, respectively, which are included in “Other intangible assets.” Intangible assets with indefinite useful lives include the trademark for PlayStation® , which is assessed to have an indefinite useful life as the trademark for PlayStation® is utilized as the core trademark for Sony’s products and services throughout the G&NS segment and Sony expects to continue using the trademark in the foreseeable future as well. The recoverable amount of the group of CGUs is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES cash flows are prepared based on the MRP. A terminal value after the final year of the total forecasted period is determined by utilizing a perpetual growth rate. The growth rate and thepre-tax discount rate were 1.5% and 9.6% as of March 31, 2022, and 1.5% and 10.8% as of March 31, 2023, respectively. Goodwill shown in the Music line of the table above is primarily allocated to the worldwide recorded music and the worldwide music publishing CGUs excluding operations in Japan. Goodwill related to the worldwide recorded music CGU has carrying amounts of 235,746 millionyen and 255,834 million yen, as of March 31, 2022 and 2023, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on the MRP. A terminal value after the final year of the total forecasted period is determined by utilizing a perpetual growth rate. The growth rate and thepre-tax discount rate were 1.0% and 8.9% as of March 31, 2022, and 1.0% and 12.8% as of March 31, 2023, respectively. Goodwill related to the music publishing CGU has carrying amounts of 270,116 million yen and 290,833 million yen, as of March 31, 2022 and 2023, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on the MRP. A terminal value after the final year of the total forecasted period is determined by utilizing a perpetual growth rate. The growth rate and thepre-tax discount rate were 2.5% and 8.5% as of March 31, 2022, and 3.0% and 11.1% as of March 31, 2023, respectively. | *3 | Board of Directors. Based on these policies, an ALM committee and a risk management committee typically meet once each month to understand and confirm actual conditions and deliberate future measures and risk conditions. On a daily basis, the risk management division maintains an overall understanding of interest, exchange rates and duration of financial assets and liabilities, and monitors Value at Risk (“VaR”), which quantifies the maximum expected loss which could occur during a given holding period and at a given probability, and interest rate sensitivity analysis, and confirms regulatory compliance. The subsidiary also conducts interest rate swaps and other derivative transactions to hedge against interest and exchange rate fluctuation risks. In the measurement of VaR, the historical method (time period: 250 days, confidence level: 99.0%) is used, and interest rate risk, exchange rate risk, and price risk are measured as the amount of market risk. The total market risk volume as of March 31, 2021 and 2022 was 13,215 million yen and 8,230 million yen, respectively. VaR employs statistical methods to estimate the maximum loss that could occur in a defined period of time in the future based on market fluctuation data for a defined period of time in the past; therefore, VaR may not capture the risk in situations in which the market environment undergoes drastic changes that are unpredictable under normal circumstances.Pictures
|
Goodwill shown in the Pictures line of the table above is primarily allocated to the animation distribution CGU. Goodwill related to the animation distribution CGU has carrying amounts of 102,590 million yen and 124,265 million yen, as of March 31, 2022 and 2023, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on the MRP, with revenues in years beyond the MRP based on declining growth rates. A terminal value is based on a revenue multiple applied to the final year of the total forecasted period. The growth rates beyond the MRP period were 5.0% to 15.0% and 5.0% to 15.0%, and thepre-tax discount rate were 13.5% and 16.2% as of March 31, 2022 and 2023, respectively. The value in use calculation uses key assumptions such as thepre-tax discount rate, perpetual growth rate, competitive and regulatory environment, and technology trends. For each assumption, historical experience, external information, competitors and industry trends are taken into account. Sony does not expect the recoverable amounts to be lower than the carrying amounts even when the growth rate andpre-tax discount rate that are used in the evaluation of the recoverable amounts change within a reasonably predictable range. Due to the reform and replacement of benchmark interest rates such as the London Interbank Offered Rate (“LIBOR”), the use of other interbank offered rates (“IBORs”) has become a priority for global regulators. The use of panel-based LIBOR ceased as of December 2021, except for the use of certain U.S. dollar (“USD”) LIBORs. The1-,
3-,
and 6-months panel-based USD LIBOR settings are expected to be abolished and lose their representativeness at the end of June 2023. The overnight and 12 months USD LIBOR settings will permanently cease immediately after June 2023. As of March 31, 2022, the banking subsidiary is party to contracts that reference USD LIBOR.As mentioned above, the JPY and GBP IBORs have been abolished on December 31, 2021 and replaced by alternative interest rates such as the Tokyo Overnight Average rate (“TONA”) and the Sterling Overnight Index Average (“SONIA”). Currently, the Secured Overnight Financing Rate (“SOFR”) is gradually replacing USD LIBOR as a reference rate. There remains key differences between USD LIBOR and SOFR. USD LIBOR is a “term rate,” which means that it is published for a specific borrowing period (such as three months or six months) and is “forward-looking,” because it is published at the beginning of the borrowing period. On the other hand, SOFR, TONA and SONIA are currently “backward-looking” rates, based on overnight rates from actual transactions, and are published at the end of the overnight borrowing period. Furthermore, LIBOR includes a credit spread over the risk-free rate, while SOFR, TONA and SONIA currently do not include such a spread. To transition existing contracts and agreements that reference USD LIBOR to SOFR, adjustments for term differences and credit differences need to be applied to SOFR, to enable the two benchmark rates to be economically equivalent on transition.
As of March 31, 2022, the Alternative Reference Rates Committee (“ARRC”), a working group for a transition from USD LIBOR to a more robust reference rate, recommends SOFR instead of LIBOR. However, some market participants are calling for the use of credit sensitive rates (“CSRs”) that include a credit spread, and these rates might be used in addition to SOFR.
In 2021 the banking subsidiary established a LIBOR transition project plan. This transition project is considering changes to systems, business processes, risk management and valuation models, as well as managing any related tax and accounting implications. As of March 31, 2022, changes to systems, business processes, risk management and valuation models are largely complete, but some contractual changes, such as securities and derivatives transactions that reference USD LIBOR, have not yet been implemented. Therefore, there is a risk that Sony will not be able to make the necessary contractual changes before June 2023, when the 1-, 3-, and6-months
panel-based USD LIBOR are abolished. In addition, CSRs, rather than SOFR, might be used as an alternative interest rate, which would require the implementation of system changes in a short period of time. To avoid the above risks, Sony closely monitors the progress of necessary contractual changes with its counter parties. Sony is also flexible in responding to systemic issues through collaboration among project members and other departments.Sony Group Corporation has a loan contract and interest swap agreement, related to the loan contract, aiming to manage certain borrowing costs, both of which reference USD LIBOR, which expire after 2023. Sony is currently in discussion with the counterparties on which alternative interest rate would be referenced in the contractual periods after the current benchmark rates are no longer available.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | The following table contains details of all of the financial instruments that Sony Group Corporation and the banking subsidiary hold at March 31, 2022 which reference USD LIBOR and SOFR and have not yet transitioned to SOFR or an alternative interest rate benchmark:Content assets
|
| | | | | | | | | | | | | | | | | | | | | | have yet to transition to an alternative | | | | | | | | | | | | | | | | | | | | Financial assets required to be measured at FVOCI | | | 25,142 | | | | 22,954 | | Financial assets required to be measured at AC | | | 244,388 | | | | 209,059 | | | | | (146,778 | ) | | | (146,778 | ) | | | | 20,178 | | | | 19,948 | | | | | | | | | | | | | | 142,930 | | | | 105,183 | | | | | | | | | | |
* | Derivatives are presented on a net basis.
|
Inventories are comprised of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 322,103 | | | | 398,474 | | | | 533,612 | | | | | 142,935 | | | | 133,560 | | | | 163,206 | | Raw materials, purchased components and supplies | | | 94,741 | | | | 104,634 | | | | 177,189 | | | | | | | | | | | | | | | | | | 559,779 | | | | 636,668 | | | | 874,007 | | | | | | | | | | | | | | |
For the fiscal years ended March 31, 2021 and 2022, the write-downs of inventories were 73,594 million yen and 80,546 million yen, respectively.
For the fiscal years ended March 31, 2021 and 2022, the amounts of inventories expensed and included in cost of sales were 2,057,248 million yen and 2,495,769 million yen, respectively. Included within these amounts for the fiscal years ended March 31, 2021 and 2022 were employee benefits expenses of 269,428 million yen and 282,765 million yen, respectively, and depreciation and amortization expenses of 192,760 million yen and 201,860 million yen, respectively. Other cost of sales mainly consists of material costs, subcontractor costs and other professional service fees.The changes in content assets for the fiscal years ended March 31, 2022 and 2023 are as follows: | Investments in associates and joint ventures
|
There are no associates or joint ventures that are individually material to Sony.
The carrying amounts of investments in associates and joint ventures that are not individually material to Sony, as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investments accounted for using the equity method | | | | | | | | | | | | | | | | 181,795 | | | | 198,539 | | | | 235,671 | | | | | 22,496 | | | | 26,547 | | | | 32,842 | | | | | | | | | | | | | | | | | | 204,291 | | | | 225,086 | | | | 268,513 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Sony’s share of comprehensive income, profit or loss and other comprehensive income, of associates and joint ventures that are not individually material to Sony for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | 14,086 | | | | 21,920 | | | | | (2,535 | ) | | | 1,726 | | | | | | | | | | | | | | 11,551 | | | | 23,646 | | | | | | | | | | | Share of other comprehensive income | | | | | | | | | | | | 884 | | | | 2,077 | | | | | 1 | | | | 1 | | | | | | | | | | | | | | 885 | | | | 2,078 | | | | | | | | | | | Share of comprehensive income | | | | | | | | | | | | 14,970 | | | | 23,997 | | | | | (2,534 | ) | | | 1,727 | | | | | | | | | | | | | | 12,436 | | | | 25,724 | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| Property, plant and equipment
|
The changes in property, plant and equipment for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of April 1, 2020: | | | | | | | | | | | | | | | | | | | | | | | | 77,716 | | | | 731,440 | | | | 1,844,088 | | | | 78,811 | | | | 2,732,055 | | Accumulated depreciation and impairment losses | | | — | | | | (475,344 | ) | | | (1,337,056 | ) | | | (2,457 | ) | | | (1,814,857 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 77,716 | | | | 256,096 | | | | 507,032 | | | | 76,354 | | | | 917,198 | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 22,464 | | | | 91,873 | | | | 187,003 | | | | 301,340 | | Acquisitions through business combinations | | | — | | | | 47 | | | | 50 | | | | — | | | | 97 | | | | | 340 | | | | 12,568 | | | | 146,025 | | | | (159,774 | ) | | | (841 | ) | Disposals or classified as held for sale *1 | | | (2,484 | ) | | | (1,599 | ) | | | (3,140 | ) | | | (779 | ) | | | (8,002 | ) | | | | — | | | | (24,405 | ) | | | (189,568 | ) | | | — | | | | (213,973 | ) | | | | (37 | ) | | | (1,063 | ) | | | (2,866 | ) | | | (2,203 | ) | | | (6,169 | ) | | | | 505 | | | | 2,572 | | | | 2,756 | | | | 736 | | | | 6,569 | | | | | — | | | | (2,721 | ) | | | (2,348 | ) | | | (609 | ) | | | (5,678 | ) | | | | | | | | | | | | | | | | | | | | | | | | | (1,676 | ) | | | 7,863 | | | | 42,782 | | | | 24,374 | | | | 73,343 | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2021: | | | | | | | | | | | | | | | | | | | | | | | | 76,077 | | | | 755,115 | | | | 1,864,034 | | | | 102,310 | | | | 2,797,536 | | Accumulated depreciation and impairment losses | | | (37 | ) | | | (491,156 | ) | | | (1,314,220 | ) | | | (1,582 | ) | | | (1,806,995 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 76,040 | | | | 263,959 | | | | 549,814 | | | | 100,728 | | | | 990,541 | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | 2,461 | | | | 25,434 | | | | 91,189 | | | | 229,094 | | | | 348,178 | | Acquisitions through business combinations | | | — | | | | 1,946 | | | | 1,437 | | | | — | | | | 3,383 | | | | | 24 | | | | 48,600 | | | | 134,660 | | | | (185,979 | ) | | | (2,695 | ) | Disposals or classified as held for sale *1 | | | (1,628 | ) | | | (2,248 | ) | | | (4,690 | ) | | | (158 | ) | | | (8,724 | ) | | | | — | | | | (29,906 | ) | | | (205,920 | ) | | | — | | | | (235,826 | ) | | | | — | | | | (235 | ) | | | (579 | ) | | | (74 | ) | | | (888 | ) | | | | 1,226 | | | | 9,640 | | | | 7,032 | | | | 1,036 | | | | 18,934 | | | | | — | | | | 282 | | | | 22 | | | | 6 | | | | 310 | | | | | | | | | | | | | | | | | | | | | | | | | | 2,083 | | | | 53,513 | | | | 23,151 | | | | 43,925 | | | | 122,672 | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | 78,160 | | | | 832,785 | | | | 1,953,985 | | | | 145,940 | | | | 3,010,870 | | Accumulated depreciation and impairment losses | | | (37 | ) | | | (515,313 | ) | | | (1,381,020 | ) | | | (1,287 | ) | | | (1,897,657 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 78,123 | | | | 317,472 | | | | 572,965 | | | | 144,653 | | | | 1,113,213 | | | | | | | | | | | | | | | | | | | | | | |
*1 | An asset or disposal group for which the cash flows are expected to arise principally from sale rather than continuing use is classified to current asset as an asset held for sale.
|
*2 | Depreciation expenses are allocated to the cost of inventory and are recognized in cost of sales as inventory is sold, or are directly recognized in selling, general and administrative expenses and research and development expenditures in the consolidated statements of income, depending on the use of the asset.
|
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Sony leases communication and commercial equipment, plant, office space, warehouses, employees’ residential facilities and other assets.
assets are comprised of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of April 1, 2020: | | | | | | | | | | | | | | | | | | | | 16,581 | | | | 338,426 | | | | 18,275 | | | | 373,282 | | | | | | | | | | | | | | | | | | | Changes in the carrying amount | | | | | | | | | | | | | | | | | Increase due to new lease agreements and remeasurement of lease liabilities | | | 1,657 | | | | 61,887 | | | | 5,299 | | | | 68,843 | | Decrease due to termination of lease agreements and remeasurement of lease liabilities | | | (0 | ) | | | (2,255 | ) | | | (268 | ) | | | (2,523 | ) | | | | (1,043 | ) | | | (70,049 | ) | | | (8,330 | ) | | | (79,422 | ) | | | | (1,801 | ) | | | (659 | ) | | | 314 | | | | (2,146 | ) | | | | | | | | | | | | | | | | | | | | | (1,187 | ) | | | (11,076 | ) | | | (2,985 | ) | | | (15,248 | ) | | | | | | | | | | | | | | | | | | Balance as of March 31, 2021: | | | | | | | | | | | | | | | | | | | | 15,394 | | | | 327,350 | | | | 15,290 | | | | 358,034 | | | | | | | | | | | | | | | | | | | Changes in the carrying amount | | | | | | | | | | | | | | | | | Increase due to new lease agreements and remeasurement of lease liabilities | | | 2,908 | | | | 104,456 | | | | 12,816 | | | | 120,180 | | Decrease due to termination of lease agreements and remeasurement of lease liabilities | | | (159 | ) | | | (5,685 | ) | | | (356 | ) | | | (6,200 | ) | | | | (1,140 | ) | | | (72,944 | ) | | | (7,700 | ) | | | (81,784 | ) | | | | 797 | | | | 22,091 | | | | 312 | | | | 23,200 | | | | | | | | | | | | | | | | | | | | | | 2,406 | | | | 47,918 | | | | 5,072 | | | | 55,396 | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2022: | | | | | | | | | | | | | | | | | | | | 17,800 | | | | 375,268 | | | | 20,362 | | | | 413,430 | | | | | | | | | | | | | | | | | | |
| Income, expenses, and cash flows (except for depreciation) arising from lease contracts as a lessee
|
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Interest expenses on lease liabilities | | | 8,292 | | | | 8,223 | | Expenses related to short-term leases accounted for applying an exemption | | | 17,805 | | | | 19,764 | | | | | (2,256 | ) | | | (2,256 | ) | Net cash outflows for leases | | | 81,399 | | | | 83,546 | |
Refer to Note 6 for the maturity analysis of Sony’s financial liabilities including lease liabilities.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| Goodwill and intangible assets
|
The changes in goodwill for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | | | | | | | | | | 1,035,320 | | | | 1,073,178 | | | | | (344,391 | ) | | | (347,069 | ) | | | | | | | | | | | | | 690,929 | | | | 726,109 | | | | | | | | | | | Increase (decrease) due to: | | | | | | | | | | | | 15,679 | | | | 197,644 | | Disposals or classified as held for sale * | | | (2,486 | ) | | | (40,201 | ) | | | | — | | | | — | | | | | 21,987 | | | | 69,343 | | | | | — | | | | — | | Balance at end of the fiscal year | | | | | | | | | | | | 1,073,178 | | | | 1,312,615 | | | | | (347,069 | ) | | | (359,720 | ) | | | | | | | | | | | | | 726,109 | | | | 952,895 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | Balance as of April 1, 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,909,102 | | | | 304,036 | | | | 724,513 | | | | 26,709 | | | | 32,019 | | | | 14,178 | | | | 4,010,557 | | Accumulated amortization and impairment losses | | | (2,514,627 | ) | | | (239,403 | ) | | | (167,761 | ) | | | (14,232 | ) | | | (7,008 | ) | | | (4,979 | ) | | | (2,948,010 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 394,475 | | | | 64,633 | | | | 556,752 | | | | 12,477 | | | | 25,011 | | | | 9,199 | | | | 1,062,547 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 313,648 | | | | 75,841 | | | | 87,350 | | | | 2,209 | | | | — | | | | 20,997 | | | | 500,045 | | Acquisitions through business combinations | | | 11,724 | | | | 32,124 | | | | 28,194 | | | | — | | | | 9,760 | | | | 10,797 | | | | 92,599 | | Disposals or classified as held for sale | | | (932 | ) | | | (4,747 | ) | | | — | | | | — | | | | — | | | | — | | | | (5,679 | ) | | | | (294,350 | ) | | | (70,514 | ) | | | (25,182 | ) | | | (604 | ) | | | (1,648 | ) | | | (8,602 | ) | | | (400,900 | ) | | | | (13,870 | ) | | | (738 | ) | | | — | | | | — | | | | — | | | | — | | | | (14,608 | ) | | | | 42,782 | | | | 4,619 | | | | 57,676 | | | | 1,161 | | | | 938 | | | | 866 | | | | 108,042 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 59,002 | | | | 36,585 | | | | 148,038 | | | | 2,766 | | | | 9,050 | | | | 24,058 | | | | 279,499 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,549,934 | | | | 395,045 | | | | 914,418 | | | | 30,278 | | | | 43,219 | | | | 46,086 | | | | 4,978,980 | | Accumulated amortization and impairment losses | | | (3,096,457 | ) | | | (293,827 | ) | | | (209,628 | ) | | | (15,035 | ) | | | (9,158 | ) | | | (12,829 | ) | | | (3,636,934 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 453,477 | | | | 101,218 | | | | 704,790 | | | | 15,243 | | | | 34,061 | | | | 33,257 | | | | 1,342,046 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 526,273 | | | | 83,491 | | | | 27,839 | | | | 942 | | | | 35 | | | | 10,725 | | | | 649,305 | | Acquisitions through business combinations | | | 419 | | | | 7 | | | | 607 | | | | — | | | | 1,171 | | | | 46,079 | | | | 48,283 | | Disposals or classified as held for sale | | | (38,899 | ) | | | — | | | | — | | | | — | | | | — | | | | (7 | ) | | | (38,906 | ) | | | | (381,753 | ) | | | (76,824 | ) | | | (31,686 | ) | | | (1,285 | ) | | | (2,755 | ) | | | (15,820 | ) | | | (510,123 | ) | | | | (13,815 | ) | | | — | | | | (236 | ) | | | — | | | | — | | | | (152 | ) | | | (14,203 | ) | | | | 27,228 | | | | 4,665 | | | | 50,980 | | | | 1,086 | | | | 937 | | | | 294 | | | | 85,190 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 290 | | | | 290 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 119,453 | | | | 11,339 | | | | 47,504 | | | | 743 | | | | (612 | ) | | | 41,409 | | | | 219,836 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,320,022 | | | | 419,025 | | | | 1,008,942 | | | | 32,484 | | | | 45,988 | | | | 97,386 | | | | 5,923,847 | | Accumulated amortization and impairment losses | | | (3,747,092 | ) | | | (306,468 | ) | | | (256,648 | ) | | | (16,498 | ) | | | (12,539 | ) | | | (22,720 | ) | | | (4,361,965 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 572,930 | | | | 112,557 | | | | 752,294 | | | | 15,986 | | | | 33,449 | | | | 74,666 | | | | 1,561,882 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* | Disposals or classified as held for sale for the fiscal year ended March 31, 2022 relate mainly to the transfer of certain operations of GameShow
Network, LLC, a wholly-owned subsidiary in the Pictures segment. Refer to Note 31 for thedetails
of the transfer.
|
The carrying amounts of goodwill by segment as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Game & Network Services *1 | | | 170,974 | | | | 172,360 | | | | 200,206 | | | | | 391,325 | | | | 408,424 | | | | 539,055 | | | | | 103,626 | | | | 120,083 | | | | 187,658 | | Electronics Products & Solutions | | | 11,354 | | | | 11,533 | | | | 11,949 | | Imaging & Sensing Solutions | | | 2,816 | | | | 2,875 | | | | 3,193 | | | | | 10,834 | | | | 10,834 | | | | 10,834 | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | 690,929 | | | | 726,109 | | | | 952,895 | | | | | | | | | | | | | | |
All of the goodwill shown in the G&NS line of the table above relates to the PlayStation®
business. Intangible assets with indefinite useful lives related to the PlayStation®
business have carrying amounts of 57,397 million yen, 57,449 million yen and 57,217 million yen, as of April 1, 2020 and March 31, 2021 and 2022, respectively, which are included in “Other intangible assets.” Intangible assets with indefinite useful lives include the trademark for PlayStation®
,which is assessed to have an indefinite useful life as the trademark for PlayStation®
is utilized as the core trademark for Sony’s products and services throughout the G&NS segment and Sony expects to continue using the trademark in the foreseeable future as well. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on the MRP. A terminal value after the final year of the total forecasted period is determined by utilizing a perpetual growth rate. The growth rate and the pre-tax discountrate we
re 1.5% and 9.8% as of April 1, 2020, 1.5% and 8.7% as of March 31, 2021, and 1.5% and 9.6% as of March 31, 2022, respectively.Goodwill shown in the Music line of the table above is primarily allocated to the worldwide recorded music and the worldwide music publishing CGUs excluding operations in Japan.
Goodwill related to the worldwide recorded music CGU has carrying amounts of 128,918 million yen, 136,572 million and 235,746 million yen, as of April 1, 2020 and March 31, 2021 and 2022, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on the MRP. A terminal value after the final year of thetotal
forecasted periodis determined by utilizing a perpetual growth rate
. The growth rate and thepre-tax
discount ratewe
re 1.0% and 9.2% as of April 1, 2020, 1.0% and 9.3% as of March 31, 2021, and 1.0% and 8.9% as of March 31, 2022, respectively.Goodwill related to the music publishing CGU has carrying amounts of 238,684 million yen, 248,130 million yen and 270,116 million yen, as of April 1, 2020, March 31, 2021 and 2022, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on the MRP. A terminal value after the final year of theforecasted periodis determined by utilizing a perpetual growth rate
. The growth rate and thepre-tax
discount ratewe
re 2.5% and 8.4% as of April 1, 2020, 2.5% and 8.2% as of March 31, 2021, and 2.5% and 8.5% as of March 31, 2022, respectively.Goodwill shown in the Pictures line of the table above is primarily allocated to the United States television network and the animation distribution CGUs.
Goodwill related to the United States television network CGU has carrying amounts of
54,156 million yen, 55,092 million yen and 20,347 million yen, as of April 1, 2020, March 31, 2021 and 2022, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on the MRP, with earnings in years beyond the MRP based on a steady growth rate. A terminal value is based on an earnings multiple applied to the final year of the total forecasted period. The growth rate beyond the MRP period and the pre-tax discount rate were
1.0% and 15.9% as of April 1, 2020, 1.0% and 14.7% as of March 31, 2021, and(
5.0
and 13.1% as of March 31, 2022, respectively.Goodwill related to the animation distribution CGU has a carrying amount of
102,590 million yen, as of March 31, 2022. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on the MRP, with revenues in years beyond the MRP based on declining growth rates. A terminal value is based on a revenue multiple applied to the final year of the total forecasted period. The growth rates beyond the MRP period were
5.0% to 15.0%,and the pre-tax discount rate was
13.5%as of March 31, 2022. The carrying amounts of the CGU as of April 1, 2020 and March 31, 2021 have not been presented as these amounts were not material.
The value in use calculation uses key assumptions such as thepre-tax
discount rate, perpetual growth rate, competitive and regulatory environment, and technology trends. For each assumption, historical experience, external information, competitors and industry trends are taken into account. Sony does not expect the recoverable amounts to be lower than the carrying amounts even when the growth rate andpre-tax
discount rate that are used in the evaluation of the recoverable amounts change within a reasonably predictable range.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The changes in content assets for the fiscal years ended March 31, 2021 and 2022 are as follows:
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| | |
| | | | | |
| | Balance as of April 1, 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,712,996 | | | | 265,517 | | | | 628,184 | | | | 25,847 | | | | 31,218 | | | | 10,118 | | | | 3,673,880 | | Accumulated amortization and impairment losses | | | (2,315,662 | ) | | | (202,966 | ) | | | (140,705 | ) | | | (13,099 | ) | | | (5,592 | ) | | | (3,212 | ) | | | (2,681,236 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 397,334 | | | | 62,551 | | | | 487,479 | | | | 12,748 | | | | 25,626 | | | | 6,906 | | | | 992,644 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 211,521 | | | | 61,446 | | | | 61,106 | | | | 31 | | | | 451 | | | | 6,985 | | | | 341,540 | | Acquisitions through business combinations | | | — | | | | 1,912 | | | | 235 | | | | — | | | | — | | | | — | | | | 2,147 | | Disposals or classified as held for sale | | | (5,182 | ) | | | (2,797 | ) | | | — | | | | — | | | | — | | | | — | | | | (7,979 | ) | | | | (211,359 | ) | | | (57,053 | ) | | | (20,211 | ) | | | (511 | ) | | | (1,247 | ) | | | (2,858 | ) | | | (293,239 | ) | | | | (4,408 | ) | | | (1,782 | ) | | | — | | | | — | | | | — | | | | (1,990 | ) | | | (8,180 | ) | | | | 6,569 | | | | 356 | | | | 28,143 | | | | 209 | | | | 181 | | | | 156 | | | | 35,614 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2,859 | ) | | | 2,082 | | | | 69,273 | | | | (271 | ) | | | (615 | ) | | | 2,293 | | | | 69,903 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,909,102 | | | | 304,036 | | | | 724,513 | | | | 26,709 | | | | 32,019 | | | | 14,178 | | | | 4,010,557 | | Accumulated amortization and impairment losses | | | (2,514,627 | ) | | | (239,403 | ) | | | (167,761 | ) | | | (14,232 | ) | | | (7,008 | ) | | | (4,979 | ) | | | (2,948,010 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 394,475 | | | | 64,633 | | | | 556,752 | | | | 12,477 | | | | 25,011 | | | | 9,199 | | | | 1,062,547 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 313,648 | | | | 75,841 | | | | 87,350 | | | | 2,209 | | | | — | | | | 20,997 | | | | 500,045 | | Acquisitions through business combinations | | | 11,724 | | | | 32,124 | | | | 28,194 | | | | — | | | | 9,760 | | | | 10,797 | | | | 92,599 | | Disposals or classified as held for sale | | | (932 | ) | | | (4,747 | ) | | | — | | | | — | | | | — | | | | — | | | | (5,679 | ) | | | | (294,350 | ) | | | (70,514 | ) | | | (25,182 | ) | | | (604 | ) | | | (1,648 | ) | | | (8,602 | ) | | | (400,900 | ) | | | | (13,870 | ) | | | (738 | ) | | | — | | | | — | | | | — | | | | — | | | | (14,608 | ) | | | | 42,782 | | | | 4,619 | | | | 57,676 | | | | 1,161 | | | | 938 | | | | 866 | | | | 108,042 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 59,002 | | | | 36,585 | | | | 148,038 | | | | 2,766 | | | | 9,050 | | | | 24,058 | | | | 279,499 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,549,934 | | | | 395,045 | | | | 914,418 | | | | 30,278 | | | | 43,219 | | | | 46,086 | | | | 4,978,980 | | Accumulated amortization and impairment losses | | | (3,096,457 | ) | | | (293,827 | ) | | | (209,628 | ) | | | (15,035 | ) | | | (9,158 | ) | | | (12,829 | ) | | | (3,636,934 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 453,477 | | | | 101,218 | | | | 704,790 | | | | 15,243 | | | | 34,061 | | | | 33,257 | | | | 1,342,046 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The additions in Film costs include the cost of films internally produced and acquired from third party projects. Film costs acquired from third party projects are not a significant portion of Film costs recorded by Sony. The additions in Broadcasting rights, Music catalogs, Artist contracts and Music distribution rights mainly represent acquisitions through contracts with third parties. The additions in Game content primarily include externally acquired game content for the fiscal year ended March 31, 2022 and internally developed game content for the fiscal year ended March 31, 2023. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | (3) Other intangible assets |
The changes in other intangible assets for the fiscal years ended March 31, 2021 and 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | Balance as of April 1, 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 218,192 | | | | 41,494 | | | | 24,250 | | | | 827,210 | | | | 55,752 | | | | 148,729 | | | | 1,315,627 | | Accumulated amortization and impairment losses | | | (200,406 | ) | | | (36,775 | ) | | | (6,397 | ) | | | (582,875 | ) | | | (27,162 | ) | | | (70,957 | ) | | | (924,572 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,786 | | | | 4,719 | | | | 17,853 | | | | 244,335 | | | | 28,590 | | | | 77,772 | | | | 391,055 | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,668 | | | | 639 | | | | 158 | | | | 93,642 | | | | — | | | | 3,538 | | | | 102,645 | | Acquisitions through business combinations | | | 2,488 | | | | 19,121 | | | | 7,076 | | | | 6,895 | | | | — | | | | 8,132 | | | | 43,712 | | | | | — | | | | — | | | | — | | | | 15,681 | | | | — | | | | — | | | | 15,681 | | Disposals or classified as held for sale | | | (49 | ) | | | (565 | ) | | | (550 | ) | | | (2,599 | ) | | | — | | | | (107 | ) | | | (3,870 | ) | | | | (5,576 | ) | | | (4,975 | ) | | | (1,875 | ) | | | (87,113 | ) | | | (3,361 | ) | | | (6,904 | ) | | | (109,804 | ) | | | | (6 | ) | | | — | | | | (313 | ) | | | (3,218 | ) | | | — | | | | (202 | ) | | | (3,739 | ) | | | | 216 | | | | 2,146 | | | | 2,280 | | | | 5,534 | | | | 2,829 | | | | 1,577 | | | | 14,582 | | | | | 140 | | | | — | | | | 1 | | | | 819 | | | | — | | | | (1,119 | ) | | | (159 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,881 | | | | 16,366 | | | | 6,777 | | | | 29,641 | | | | (532 | ) | | | 4,915 | | | | 59,048 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 213,649 | | | | 58,427 | | | | 32,683 | | | | 952,153 | | | | 61,939 | | | | 155,479 | | | | 1,474,330 | | Accumulated amortization and impairment losses | | | (193,982 | ) | | | (37,342 | ) | | | (8,053 | ) | | | (678,177 | ) | | | (33,881 | ) | | | (72,792 | ) | | | (1,024,227 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,667 | | | | 21,085 | | | | 24,630 | | | | 273,976 | | | | 28,058 | | | | 82,687 | | | | 450,103 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,432 | | | | — | | | | 17 | | | | 117,019 | | | | — | | | | 3,323 | | | | 126,791 | | Acquisitions through business combinations | | | 2,056 | | | | 9,237 | | | | 16,655 | | | | 26,298 | | | | — | | | | 38,394 | | | | 92,640 | | | | | — | | | | — | | | | — | | | | 19,835 | | | | — | | | | — | | | | 19,835 | | Disposals or classified as held for sale | | | (8 | ) | | | (112 | ) | | | (14 | ) | | | (2,907 | ) | | | — | | | | (129 | ) | | | (3,170 | ) | | | | (8,152 | ) | | | (9,437 | ) | | | (4,290 | ) | | | (94,821 | ) | | | (3,954 | ) | | | (14,566 | ) | | | (135,220 | ) | | | | (8 | ) | | | (93 | ) | | | — | | | | (342 | ) | | | — | | | | (66 | ) | | | (509 | ) | | | | 156 | | | | 1,483 | | | | 1,516 | | | | 3,715 | | | | 2,176 | | | | 613 | | | | 9,659 | | | | | (1,121 | ) | | | 158 | | | | 699 | | | | 4,299 | | | | — | | | | (322 | ) | | | 3,713 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (645 | ) | | | 1,236 | | | | 14,583 | | | | 73,096 | | | | (1,778 | ) | | | 27,247 | | | | 113,739 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 201,243 | | | | 66,593 | | | | 51,747 | | | | 1,045,743 | | | | 66,583 | | | | 199,311 | | | | 1,631,220 | | Accumulated amortization and impairment losses | | | (182,221 | ) | | | (44,272 | ) | | | (12,534 | ) | | | (698,671 | ) | | | (40,303 | ) | | | (89,377 | ) | | | (1,067,378 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,022 | | | | 22,321 | | | | 39,213 | | | | 347,072 | | | | 26,280 | | | | 109,934 | | | | 563,842 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | Balance as of April 1, 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 197,891 | | | | 38,842 | | | | 23,150 | | | | 749,598 | | | | 56,270 | | | | 169,202 | | | | 1,234,953 | | Accumulated amortization and impairment losses | | | (181,529 | ) | | | (35,024 | ) | | | (5,576 | ) | | | (518,314 | ) | | | (24,104 | ) | | | (92,906 | ) | | | (857,453 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 16,362 | | | | 3,818 | | | | 17,574 | | | | 231,284 | | | | 32,166 | | | | 76,296 | | | | 377,500 | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 8,210 | | | | 53 | | | | 9 | | | | 85,562 | | | | — | | | | 4,203 | | | | 98,037 | | Acquisitions through business combinations | | | 16 | | | | 1,693 | | | | 358 | | | | 191 | | | | 156 | | | | 1,500 | | | | 3,914 | | | | | — | | | | — | | | | — | | | | 17,255 | | | | — | | | | — | | | | 17,255 | | Disposals or classified as held for sale | | | (81 | ) | | | — | | | | (1 | ) | | | (5,018 | ) | | | (202 | ) | | | (253 | ) | | | (5,555 | ) | | | | (5,851 | ) | | | (1,130 | ) | | | (550 | ) | | | (78,364 | ) | | | (3,273 | ) | | | (4,300 | ) | | | (93,468 | ) | | | | (97 | ) | | | — | | | | — | | | | (6,401 | ) | | | — | | | | (499 | ) | | | (6,997 | ) | | | | (14 | ) | | | 286 | | | | 483 | | | | 752 | | | | (24 | ) | | | 884 | | | | 2,367 | | | | | (759 | ) | | | (1 | ) | | | (20 | ) | | | (926 | ) | | | (233 | ) | | | (59 | ) | | | (1,998 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,424 | | | | 901 | | | | 279 | | | | 13,051 | | | | (3,576 | ) | | | 1,476 | | | | 13,555 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 218,192 | | | | 41,494 | | | | 24,250 | | | | 827,210 | | | | 55,752 | | | | 148,729 | | | | 1,315,627 | | Accumulated amortization and impairment losses | | | (200,406 | ) | | | (36,775 | ) | | | (6,397 | ) | | | (582,875 | ) | | | (27,162 | ) | | | (70,957 | ) | | | (924,572 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,786 | | | | 4,719 | | | | 17,853 | | | | 244,335 | | | | 28,590 | | | | 77,772 | | | | 391,055 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Changes in carrying amount: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,668 | | | | 639 | | | | 158 | | | | 93,642 | | | | — | | | | 3,538 | | | | 102,645 | | Acquisitions through business combinations | | | 2,488 | | | | 19,121 | | | | 7,076 | | | | 6,895 | | | | — | | | | 8,132 | | | | 43,712 | | | | | — | | | | — | | | | — | | | | 15,681 | | | | — | | | | — | | | | 15,681 | | Disposals or classified as held for sale | | | (49 | ) | | | (565 | ) | | | (550 | ) | | | (2,599 | ) | | | — | | | | (107 | ) | | | (3,870 | ) | | | | (5,576 | ) | | | (4,975 | ) | | | (1,875 | ) | | | (87,113 | ) | | | (3,361 | ) | | | (6,904 | ) | | | (109,804 | ) | | | | (6 | ) | | | — | | | | (313 | ) | | | (3,218 | ) | | | — | | | | (202 | ) | | | (3,739 | ) | | | | 216 | | | | 2,146 | | | | 2,280 | | | | 5,534 | | | | 2,829 | | | | 1,577 | | | | 14,582 | | | | | 140 | | | | — | | | | 1 | | | | 819 | | | | — | | | | (1,119 | ) | | | (159 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,881 | | | | 16,366 | | | | 6,777 | | | | 29,641 | | | | (532 | ) | | | 4,915 | | | | 59,048 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 213,649 | | | | 58,427 | | | | 32,683 | | | | 952,153 | | | | 61,939 | | | | 155,479 | | | | 1,474,330 | | Accumulated amortization and impairment | | | (193,982 | ) | | | (37,342 | ) | | | (8,053 | ) | | | (678,177 | ) | | | (33,881 | ) | | | (72,792 | ) | | | (1,024,227 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,667 | | | | 21,085 | | | | 24,630 | | | | 273,976 | | | | 28,058 | | | | 82,687 | | | | 450,103 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Impairment ofnon-financial assets |
There were no material impairment losses for the fiscal years ended March 31 , 2021, 2022 and 2023. | Insurance-related accounts |
| Assets, liabilities, revenues and expenses included in the insurance business |
Life insurance policies that Sony underwrites in the life insurance business, whichare included in the Financial Services segment, most of which are categorized as long-duration contracts, mainly consist of whole life, term life, disease and health insurance, variable life insurance and individual variable annuity contracts. The life insurance revenues for the fiscal years ended March 31, 2021, 2022 and 2023 were 913,361 million yen, 943,092 million yen and 975,799 million yen, respectively. Property and casualty insurance policies that Sony underwrites in thenon-life insurance business, which is included in the Financial Services segment, are primarily automotive insurance contracts, which are categorized as short-duration contracts. Thenon-life insurance revenues for the fiscal years ended March 31, 2021, 2022 and 2023 were 123,574 million yen, 132,908 million yen and 139,678 million yen, respectively. The insurance contract liability in which an insured event has not occurred or a surrender option has not been exercised at the reporting date is classified asnon-current. However, if either the insured event has occurred or the surrender option has been exercised, Sony would no longer have the right to defer payment of these amounts. Since the insurance contract liability would be due to be settled within twelve months after the reporting period, it is classified as current. Deferred insurance acquisition costs As of March 31, 2022 and 2023, the balances of deferred insurance acquisition costsfor non-traditional life insurance contracts were 261,475 million yen and 324,862 million yen, respectively. Future insurance policy benefits Liabilities for future insurance policy benefits, except the portion of liabilities for minimum guarantee benefits described below, which mainly relate to individual life insurance policies, are established in amounts adequate to meet the estimated future obligations of policies in force. These liabilities, which require significant management judgment and estimates, are computed by the net level premium method based upon the assumptions as to future investment yield, morbidity, mortality rates, lapse rates and other factors. Future insurance policy benefits are computed using interest rates ranging from 0.5% to 4.5% and are based on factors such as market conditions and expected investment returns. Morbidity, mortality rates and lapse rates used as assumptions for all policies are based on either the subsidiary’s own experience or various actuarial tables. Generally these assumptions are locked in throughout the life of the contract upon the issuance of new insurance contracts, although significant changes in experience or assumptions may require Sony to provide for expected future losses. Liabilities for future insurance policy benefits include the liabilities for the minimum guarantee benefits of individual variable annuity and variable life insurance contracts. The details regarding the minimum guarantee benefits are presented in “Minimum guarantee benefit for individual variable annuity and variable life insurance contracts” below. Sony measures certain of these liabilities for future insurance policy benefits at fair value. Refer to (4). Policyholders’ account in the life insurance business Policyholders’ account in the life insurance business represents an accumulation of account deposits plus credited interest less withdrawals, expenses and mortality charges. Policyholders’ account in the life insurance business includes universal life insurance and investment contracts. Investment contracts are defined by the previous accounting practices in accordance with the provisions of IFRS 4. Universal life insurance includes interest sensitive whole life contracts and variable life insurance contracts. The credited rates associated with interest sensitive whole life contracts range from 1.7% to 2.0%. For variable life insurance contracts, policy values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit | Impairment ofnon-financial
assets |
There were 0material impairment losses for the fiscal years ended March, 2021 and 2022. Refer to Note 34 for the details of impairment of goodwill at the date of transition to IFRS.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES increases or decreases based on the value of the linked asset portfolio. Investment contracts mainly include single payment endowment contracts, single payment educational endowment contracts, individual variable annuity contracts and policies after the start of annuity payments. The credited rates associated with investment contracts, except for individual variable annuity contracts, range from 0.01% to 6.3%. For individual variable annuity contracts, policy values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. The liabilities for policyholders’ account in the life insurance business includes the liabilities related to the individual variable annuity and variable life insurance contracts with minimum guarantee benefits. Sony measures certain of these liabilities for policyholders’ account in the life insurance business at fair value. Refer to Note (4). Policyholders’ account in the life insurance business is comprised of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,278,148 | | | | 3,348,137 | | | | | 1,393,257 | | | | 1,715,921 | | | | | 119,890 | | | | 84,521 | | | | | | | | | | | | | | 4,791,295 | | | | 5,148,579 | | | | | | | | | | |
Minimum guarantee benefit for individual variable annuity and variable life insurance contracts Regarding individual variable annuity and variable life insurance contracts, minimum guarantee benefits (minimum death benefit, minimum accumulation benefit, etc.) are provided, and Sony bears the risk of fulfilling the minimum guarantee benefits prescribed in the contracts to policyholders. The fair value measurement is applied to the liability for individual variable annuity contracts with minimum guarantee benefits. Refer to Note (4). Excluding the portion of the liability measured at fair value, the liabilities for the minimum guarantee benefits are calculated using current best-estimate assumptions and are based on the ratio of the present value of expected total excess payments divided by the present value of expected total assessments over the life of the contract. Mortality rates, lapse rates, discount rates and investment yield are used as significant assumptions for this calculation. The policyholders’ account value, net amount at risk, liability for the minimum guarantee benefit, and average attained age as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | Individual variable annuity contracts | | | Variable life insurance contracts | | | | | Policyholders’ account value | | | 467,924 | | | | 1,686,488 | | | | 2,154,412 | | | | | 58,961 | | | | 6,361,770 | | | | 6,420,731 | | Liability for minimum guarantee benefit | | | 37,382 | | | | 63,392 | | | | 100,774 | |
| | | | | | | | | | | | | | | | | | | Individual variable annuity contracts | | | Variable life insurance contracts | | | | | 63 | | | | 45 | |
| | | | | | | | | | | | | | | | | | | | | | | Individual variable annuity contracts | | | Variable life insurance contracts | | | | | Policyholders’ account value | | | 419,628 | | | | 1,778,451 | | | | 2,198,079 | | | | | 78,322 | | | | 7,727,061 | | | | 7,805,383 | | Liability for minimum guarantee benefit | | | 41,214 | | | | 76,012 | | | | 117,226 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES 13. | | | | | | | | | | | | | | | | | | | Individual variable annuity contracts | | | Variable life insurance contracts | | | | | 64 | | | | 45 | |
Shadow liability adequacy test in the life insurance business When holding financial assets that are measured at fair value through other comprehensive income and correspond to insurance contract liabilities, shadow accounting is applied to evaluate insurance-related accounts as if the financial assets were sold as of the end of reporting period and valuation gains or losses were realized for the purpose of reducing the accounting mismatches between the insurance contract liabilities and the financial assets. Sony performs a shadow liability adequacy test on life insurance contracts quarterly. Mortality rates, morbidity rates, lapse rates and discount rates are used as significant assumptions for this shadow liability adequacy test. As a result of the shadow liability adequacy test, the net amounts of future insurance policy benefits minus deferred insurance acquisition costs were recorded at a sufficient level as of March 31, 2022 and 2023, and accordingly, a decrease of deferred insurance acquisition costs and an increase of future insurance policy benefits were not recorded as of those dates. | Insurance-related accounts
|
| Assets, liabilities, revenues and expenses included in the insurance business
|
Life insurance policies that subsidiariesChanges in the Financial Services segment underwrite, most of which are categorized as long-duration contracts, mainly consist of whole life, term life and accident and health, variable annuities and variable life insurance contracts. The life insurance revenues for the fiscal years ended March 31, 2021 and 2022 were 913,361 million yen and 943,092 million yen, respectively. Property and casualty insurance policies that a subsidiary in the Financial Services segment underwrites are primarily automotive insurance contracts, which are categorized as short-duration contracts. Thenon-life
insurance revenues for the fiscal years ended March 31, 2021 and 2022 were 123,574 million yen and 132,908 million yen, respectively.The insurance contract liability in which an insured event has not occurred or a surrender option has not been exercised at the reporting date is classified asnon-current.
However, if either the insured event has occurred or the surrender option has been exercised, Sony would no longer have the right to defer payment of these amounts. Since the insurance contract liability would be due to be settled within twelve months after the reporting period, it is classified as current.Deferredliabilities and deferred insurance acquisition costs
As of April 1, 2020, March 31, 2021 and 2022, the balances of deferred insurance acquisition costs ofnon-traditional
|
Changes in insurance contract liabilities The changes in insurance contract liabilities are as follows: | | | | | | | | | | | | | | | | | | | Future insurance policy benefits and other | | | Policyholders’ account in the life insurance business | | | | | Balance as of April 1, 2021 | | | 6,749,450 | | | | 4,328,894 | | | | 11,078,344 | | | | | | | | | | | | | | | | | | 134,865 | | | | — | | | | 134,865 | | | | | 6,614,585 | | | | 4,328,894 | | | | 10,943,479 | | | | | | | | | | | | | | | | | | 813,856 | | | | 468,299 | | | | 1,282,155 | | Insurance liabilities released | | | (539,586 | ) | | | (251,169 | ) | | | (790,755 | ) | Unwind of discount and actuarial items *2 | | | 149,869 | | | | 201,797 | | | | 351,666 | | Changes in valuation of expected future benefits | | | (11,144 | ) | | | 946 | | | | (10,198 | ) | Shadow accounting adjustments | | | (15,692 | ) | | | (3,169 | ) | | | (18,861 | ) | | | | (65,198 | ) | | | 29,328 | | | | (35,870 | ) | Currency exchange rate fluctuations | | | 110,485 | | | | 16,369 | | | | 126,854 | | | | | | | | | | | | | | | Balance as of March 31, 2022 | | | 7,192,040 | | | | 4,791,295 | | | | 11,983,335 | | | | | | | | | | | | | | | | | | 153,006 | | | | — | | | | 153,006 | | | | | 7,039,034 | | | | 4,791,295 | | | | 11,830,329 | | | | | | | | | | | | | | | | | | 821,226 | | | | 594,239 | | | | 1,415,465 | | Insurance liabilities released | | | (778,728 | ) | | | (261,212 | ) | | | (1,039,940 | ) | Unwind of discount and actuarial items *2 | | | 151,058 | | | | (31,604 | ) | | | 119,454 | | Changes in valuation of expected future benefits | | | 7,378 | | | | 12,142 | | | | 19,520 | | Shadow accounting adjustments | | | 2,083 | | | | (4,694 | ) | | | (2,611 | ) | | | | (76,745 | ) | | | 38,177 | | | | (38,568 | ) | Currency exchange rate fluctuations | | | 108,200 | | | | 10,236 | | | | 118,436 | | | | | | | | | | | | | | | Balance as of March 31, 2023 | | | 7,426,512 | | | | 5,148,579 | | | | 12,575,091 | | | | | | | | | | | | | | | | | | 162,091 | | | | — | | | | 162,091 | | | | | 7,264,421 | | | | 5,148,579 | | | | 12,413,000 | |
F-74 life insurance contracts were 179,894 million yen, 220,254 million yen and 261,475 million yen, respectively. Future insurance policy benefits
Liabilities for future insurance policy benefits, except the portion of liabilities for minimum guarantee benefits described below, which mainly relate to individual life insurance policies, are established in amounts adequate to meet the estimated future obligations of policies in force. These liabilities, which require significant management judgment and estimates, are computed by the net level premium method based upon the assumptions as to future investment yield, morbidity, mortality rates, lapse rates and other factors. Future insurance policy benefits are computed using interest rates ranging from 0.5% to 4.5% and are based on factors such as market conditions and expected investment returns. Morbidity, mortality rates and lapse rates used as assumptions for all policies are based on either the subsidiary’s own experience or various actuarial tables. Generally these assumptions are locked in throughout the life of the contract upon the issuance of new insurance contracts, although significant changes in experience or assumptions may require Sony to provide for expected future losses.
Liabilities for future insurance policy benefits include the liabilities for the minimum guarantee benefits of variable annuities and variable life insurance contracts. The details regarding the minimum guarantee benefits are presented in “Minimum guarantee benefit for variable annuities and variable life insurance contracts” below. Sony measures certain of these liabilities for future insurance policy benefits at fair value. Refer to (4).
Policyholders’ account in the life insurance business
Policyholders’ account in the life insurance business represents an accumulation of account deposits plus credited interest less withdrawals, expenses and mortality charges. Policyholders’ account in the life insurance business includes universal life insurance and investment contracts. Investment contracts are defined by the previous accounting practices in accordance with the provisions of IFRS 4. Universal life insurance includes interest sensitive whole life contracts and variable life insurance contracts. The credited rates associated with interest sensitive whole life contracts range from 1.7% to 2.0%. For variable life insurance contracts, policy values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. Investment contracts mainly include single payment endowment contracts, single payment educational endowment contracts, individual variable annuities and policies after the start of annuity payments. The credited rates associated with investment contracts, except for individual variable annuities, range from 0.01% to 6.3%. For individual variable annuities, policy values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. The liabilities for policyholders’ account in the life
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | *1 | insurance business includes the liabilities related to the variable annuities and variable life insurance contracts with minimum guarantee benefits. Sony measures certain of these liabilities for policyholders’ account in the life insurance business at fair value. Refer to Note (4).
Policyholders’ account in the life insurance business is comprised of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,611,577 | | | | 3,067,791 | | | | 3,278,148 | | | | | 883,429 | | | | 1,101,614 | | | | 1,393,257 | | | | | 145,004 | | | | 159,489 | | | | 119,890 | | | | | | | | | | | | | | | | | | 3,640,010 | | | | 4,328,894 | | | | 4,791,295 | | | | | | | | | | | | | | |
Minimum guarantee benefit for variable annuities and variable life insurance contracts
Regarding variable annuities and variable life insurance contracts, minimum guarantee benefits (minimum death benefit, minimum accumulation benefit, etc.) are provided, and Sony bears the risk of fulfilling the minimum guarantee benefits prescribed in the contracts to policyholders. The fair value measurement is applied to the liability for variable annuity contracts with minimum guarantee benefits. Refer to Note (4). Excluding thecurrent portion of the liability measured at fair value, the liability for the minimum guarantee benefits is calculated using current best-estimate assumptions and is based on the ratio of the present value of expected total excess payments divided by the present value of expected total assessments over the life of the contract. Mortality rates, lapse rates, discount rates and investment yield are used as significant assumptions for this calculation. The policyholders’ account value, net amount at risk, liability for the minimum guarantee benefit, and average attained age as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | Variable life insurance contracts | | | | | Policyholders’ account value | | | 464,093 | | | | 1,096,935 | | | | 1,561,028 | | | | | 71,685 | | | | 4,564,214 | | | | 4,635,899 | | Liability for minimum guarantee benefit | | | 64,045 | | | | 79,860 | | | | 143,905 | |
| | | | | | | | | | | | | | | | | | | | | | Variable life insurance contracts | | | | | 60 | | | | 45 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Variable life insurance contracts | | | | | Policyholders’ account value | | | 490,152 | | | | 1,486,001 | | | | 1,976,153 | | | | | 50,861 | | | | 5,074,637 | | | | 5,125,498 | | Liability for minimum guarantee benefit | | | 42,309 | | | | 58,246 | | | | 100,555 | |
| | | | | | | | | | | | | | | | | | | | | | Variable life insurance contracts | | | | | 61 | | | | 45 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | Variable life insurance contracts | | | | | Policyholders’ account value | | | 467,924 | | | | 1,686,488 | | | | 2,154,412 | | | | | 58,961 | | | | 6,361,770 | | | | 6,420,731 | | Liability for minimum guarantee benefit | | | 37,382 | | | | 63,392 | | | | 100,774 | |
| | | | | | | | | | | | | | | | | | | | | | Variable life insurance contracts | | | | | 63 | | | | 45 | |
Shadow liability adequacy test in the life insurance business
When holding financial assets that are measured at fair value through other comprehensive income and correspond to insurance contract liabilities, shadow accounting is applied to evaluate insurance-related accounts as if the financial assets were sold as of the end of reporting period and valuation gains or losses were realized for the purpose of reducing the accounting mismatches between the insurance contract liabilities and the financial assets. Sony performs a shadow liability adequacy test on life insurance contracts quarterly.
Mortality rates, morbidity rates, lapse rates and discount rates are used as significant assumptions for this shadow liability adequacy test.
As a result of the shadow liability adequacy test, deferred insurance acquisition costs decreased by 386,528 million yen and future insurance policy benefits increased by 268,748 million yen through other comprehensive income as of April 1, 2020. Since the net amounts of future insurance policy benefits minus deferred insurance acquisition costs were recorded at a sufficient level,and other is included in other current liabilities in the decreaseconsolidated statements of financial position.
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| *2 | Mainly includes interests credited to reserves, expenses and mortality charges. |
Changes in deferred insurance acquisition costs The changes in deferred insurance acquisition costs are as follows: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 631,231 | | | | 683,836 | | | | | | | | | | | | | | 7,245 | | | | 7,310 | | | | | 623,986 | | | | 676,526 | | | | | | | | | | | New deferred insurance acquisition costs | | | 109,320 | | | | 110,108 | | Amortization amount for current period | | | (69,237 | ) | | | (84,523 | ) | Shadow accounting adjustments | | | 4,505 | | | | 20,604 | | Currency exchange rate fluctuations | | | 8,017 | | | | 7,988 | | | | | | | | | | | Balance at end of the fiscal year | | | 683,836 | | | | 738,013 | | | | | | | | | | | | | | 7,310 | | | | 7,149 | | | | | 676,526 | | | | 730,864 | |
| * | The current portion of deferred insurance acquisition costs andis included in other current assets in the increaseconsolidated statements of future insurance policy benefits were not recorded as of March 31, 2021 and 2022.financial position.
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| F-68Significant assumptions regarding insurance contracts
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The significant assumptions and the ranges used to measure the insurance contract liabilities as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | (0.075%)-6.25% | | | | (0.115%)-6.25% | |
Other significant assumptions are mortality rates and lapse rates. Impact from changes made to assumptions
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| Changes in insurance contract liabilities and deferred insurance acquisition costs
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| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | 6,643 | | | | 15,640 | | Changes in economic assumptions | | | 7,091 | | | | 15,378 | | Changes in non-economic assumptions | | | (448 | ) | | | 262 | | | | | 18,087 | | | | 31,244 | | Changes in economic assumptions | | | 16,874 | | | | 30,858 | | Changes in non-economic assumptions | | | 1,213 | | | | 386 | |
Changes in insurance contract liabilities
The changes in insurance contract liabilities are as follows:
| | | | | | | | | | | | | | | | | | | Future insurance policy benefits and other | | | Policyholders’ account in the life insurance business | | | | | Balance as of April 1, 2020 | | | 6,646,656 | | | | 3,640,010 | | | | 10,286,666 | | | | | | | | | | | | | | | | | | 127,079 | | | | — | | | | 127,079 | | | | | 6,519,577 | | | | 3,640,010 | | | | 10,159,587 | | | | | | | | | | | | | | | | | | 786,916 | | | | 319,240 | | | | 1,106,156 | | Insurance liabilities released | | | (465,997 | ) | | | (195,202 | ) | | | (661,199 | ) | Unwind of discount and actuarial items *2 | | | 157,379 | | | | 465,769 | | | | 623,148 | | Changes in valuation of expected future benefits | | | (69,332 | ) | | | (6,401 | ) | | | (75,733 | ) | Shadow accounting adjustments | | | (258,953 | ) | | | (3,954 | ) | | | (262,907 | ) | | | | (68,340 | ) | | | 90,575 | | | | 22,235 | | Currency exchange rate fluctuations | | | 21,121 | | | | 18,857 | | | | 39,978 | | | | | | | | | | | | | | | Balance as of March 31, 2021 | | | 6,749,450 | | | | 4,328,894 | | | | 11,078,344 | | | | | | | | | | | | | | | | | | 134,865 | | | | — | | | | 134,865 | | | | | 6,614,585 | | | | 4,328,894 | | | | 10,943,479 | | | | | | | | | | | | | | | | | | 813,856 | | | | 468,299 | | | | 1,282,155 | | Insurance liabilities released | | | (539,586 | ) | | | (251,169 | ) | | | (790,755 | ) | Unwind of discount and actuarial items *2 | | | 149,869 | | | | 201,797 | | | | 351,666 | | Changes in valuation of expected future benefits | | | (11,144 | ) | | | 946 | | | | (10,198 | ) | Shadow accounting adjustments | | | (15,692 | ) | | | (3,169 | ) | | | (18,861 | ) | | | | (65,198 | ) | | | 29,328 | | | | (35,870 | ) | Currency exchange rate fluctuations | | | 110,485 | | | | 16,369 | | | | 126,854 | | | | | | | | | | | | | | | Balance as of March 31, 2022 | | | 7,192,040 | | | | 4,791,295 | | | | 11,983,335 | | | | | | | | | | | | | | | | | | 153,006 | | | | — | | | | 153,006 | | | | | 7,039,034 | | | | 4,791,295 | | | | 11,830,329 | |
| *1 | The current portion of future insurance policy benefits and other is included in other current liabilities in the consolidated statements of financial position.
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| *2 | Mainly includes interests credited to reserves, expenses and mortality charges.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Changes in deferred insurance acquisition costs
The changes in deferred insurance acquisition costs are as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 194,116 | | | | 631,231 | | | | | | | | | | | | | | 6,212 | | | | 7,245 | | | | | 187,904 | | | | 623,986 | | | | | | | | | | | New deferred insurance acquisition costs | | | 96,638 | | | | 109,320 | | Amortization amount for current period | | | (44,738 | ) | | | (69,237 | ) | Shadow accounting adjustments | | | 383,731 | | | | 4,505 | | Currency exchange rate fluctuations | | | 1,484 | | | | 8,017 | | | | | | | | | | | Balance at end of the fiscal year | | | 631,231 | | | | 683,836 | | | | | | | | | | | | | | 7,245 | | | | 7,310 | | | | | 623,986 | | | | 676,526 | |
| * | The current portion of deferred insurance acquisition costs is included in other current assets in the consolidated statements of financial position.
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| Significant assumptions regarding insurance contracts
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The significant assumptions and the ranges used to measure the insurance contract liabilities as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | (0.061% ) - 6.25% | | | | (0.046% ) - 6.25% | | | | (0.075% ) - 6.25% | |
Other significant assumptions are mortality rates and lapse rates.
Impact from changes made to assumptions
| | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | (11,064 | ) | | | 31,076 | | | | 6,643 | | Changes in economic assumptions | | | (14,048 | ) | | | 25,704 | | | | 7,091 | | Changes in non-economic assumptions | | | 2,984 | | | | 5,372 | | | | (448 | ) | | | | (465,869 | ) | | | 477,642 | | | | 18,087 | | Changes in economic assumptions | | | (472,171 | ) | | | 467,478 | | | | 16,874 | | Changes in non-economic assumptions | | | 6,302 | | | | 10,164 | | | | 1,213 | |
Economic assumptions including discount rates and non-economic assumptions including mortality rates and morbidity rates, lapse rates, and operating expense rates are developed based on best estimates by product as of each cutoff date. Best-estimate assumptions are developed to reflect past and current experiences as well as expected experiences in the future. Expected future changes in assumptions should be reflected only when they are supported by sufficient rationales. Except for a deteriorating trend in mortality rates and morbidity rates, no other expected future changes are assumed in the best-estimate assumptions applied. | Insurance-related accounts measured at fair value
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In determining the fair value of future insurance policy benefits and policyholders’ account in the life insurance business to which Sony measures at fair value, Sony uses the present value of future expected cash
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | Insurance-related accounts measured at fair value |
In determining the fair value of future insurance policy benefits and policyholders’ account in the life insurance business to which Sony measures at fair value, Sony uses the present value of future expected cash flows based on mortality rates, lapse rates, discount rates, investment yield and various actuarial assumptions. These are classified within Level 3 of the fair value hierarchy since Sony primarily uses unobservable inputs in its valuation. The fair value of future insurance policy benefits and policyholders’ account in the life insurance business as of March 31, 2022 and 2023 is as follows: | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of
| | | |
policy benefits and other | | |
in the life insurance business | | | | | 507,699 | | | | 37,382 | | | | 470,317 | | | | | 462,684 | | | | 41,214 | | | | 421,470 | |
The valuation techniques, significant unobservable inputs, and the ranges used to measure the fair value of the future insurance policy benefits and policyholders’ account in the life insurance business as of March 31, 2022 and 2023 are as follows: | | | | | | | | | Significant unobservable inputs | | | | | | | Present value of future insurance policy benefits and policyholders’ account in the life insurance business as of April 1, 2020, March 31, 2021 and 2022 is as follows:expected cash flows | | Credit spread* | | 47.5bp | | 83.6bp | | Mortality rates | | 0.003% - 35.693% | | 0.003% - 37.438% | | Lapse rates | | 0%7.500% | | 0% - 7.500% |
The decrease (increase) in fair value is the result of higher (lower) credit spreads, mortality rates or lapse rates. The fair value of the future insurance policy benefits and policyholders’ account in the life insurance business measured at fair value would not change significantly, even if one or more of the significant unobservable inputs are changed to reflect reasonably possible alternative assumptions. The changes in fair value of future insurance policy benefits and policyholders’ account in the life insurance business measured at fair value for the fiscal years ended March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 536,189 | | | | 507,699 | | | | | | | | | | | | | | | | | | | | | | | 830 | | | | (11,740 | ) | Included in other comprehensive income *3 | | | (797 | ) | | | (2,380 | ) | | | | — | | | | — | | | | | (28,523 | ) | | | (30,895 | ) | | | | | | | | | | Balance at end of the fiscal year | | | 507,699 | | | | 462,684 | | | | | | | | | | | Changes in unrealized gains (losses) relating to future insurance policy benefits and policyholders’ account in the life insurance business still held as of the end of the reporting period included in net income *2 | | | (13,638 | ) | | | (501 | ) |
| | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of
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policy benefits and other | | |
in the life insurance business | | | | | 532,191 | | | | 64,045 | | | | 468,146 | | | | | 536,189 | | | | 42,309 | | | | 493,880 | | | | | 507,699 | | | | 37,382 | | | | 470,317 | |
| *1 | The valuation techniques, significant unobservable inputs,Gains presented as negative and the ranges used to measure the fair value of the future insurance policy benefits and policyholders’ account in the life insurance businesslosses presented as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | Significant unobservable inputs
| | | | | | | | | Present value of future expected cash flows
| | Credit spread* | | 64.4bp | | 37.9bp | | 47.5bp | | Mortality rates | | 0.004%-44.865% | | 0.004%-44.865% | | 0.003%-
35.693% | | Lapse rates | | 1.000%-7.500% | | 1.000%-7.500% | | 0%-
7.500% |
The decrease (increase) in fair value is the result of higher (lower) credit spreads, mortality rates or lapse rates. The fair value of the future insurance policy benefits and policyholders’ account in the life insurance business measured at fair value would not change significantly, even if one or more of the significant unobservable inputs are changed to reflect reasonably possible alternative assumptions.
The changes in fair value of future insurance policy benefits and policyholders’ account in the life insurance business measured at fair value for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 532,191 | | | | 536,189 | | | | | | | | | | | | | | | | | | | | | | | 16,475 | | | | 830 | | Included in other comprehensive income *3 | | | 3,120 | | | | (797 | ) | | | | 1,996 | | | | — | | | | | (17,593 | ) | | | (28,523 | ) | | | | | | | | | | Balance at end of the fiscal year | | | 536,189 | | | | 507,699 | | | | | | | | | | | Changes in unrealized gains (losses) relating to future insurance policy benefits and policyholders’ account in the life insurance business still held as of reporting date included in net income *2 | | | (29,205 | ) | | | (13,638 | ) |
| *2 | Included in financial services revenue and financial services expenses | *1 | Gains presented as negative and losses presented as positive.
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| *2 | Included in financial services revenue and financial services expense in the consolidated statements of income.
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| *3 | Included in insurance contract valuation adjustments in the consolidated statements of comprehensive income. |
| *3 | Included in insurance contract valuation adjustments in the consolidated statements of comprehensive income. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | Insurance and market risks |
Risk management policy and exposure In the life insurance business, Sony manages various market-related risks in the following manner: | Insurance risk management |
With respect to insurance underwriting risk, based on the level of policy reserves and capital levels, the life insurance subsidiary manages the insurance portfolio appropriately, such as setting policy limits for each type of insurance as necessary. In addition, underwriting standards and standards for revising and abolishing each product are clearly defined as internal rules and are regularly reviewed. Concentration of insurance risk The insurance contract portfolio does not have excessive concentration risk. Interest rate risk management Interest rate risk is managed by the risk management divisi on of the life insurance subsidiary based on the policies for interest rate risk management that specify details such as risk management methods and procedures. Based on ALM policies that are determined through such methods as deliberation by the life insurance subsidiary’s Executive Committee, the subsidiary determines and confirms actual risk conditions with its Board of Directors. The division maintains an overall understanding of the interest rates and durations of financial instruments, monitors them based on the analysis of the quantity of risk using VaR, and periodically reports the status of each risk to the life insurance subsidiary’s Board of Directors and the Executive Committee. As part of the ALM management, the life insurance subsidiary invests in financial assets that match the characteristics of the insurance contract obligations, and thereby reduces interest rate risk as much as possible. Through the purchase and sale of financial assets included in their portfolio, the interest rate sensitivity (duration) of financial assets and insurance contract obligations is matched as much as possible so that they ensure sufficient cash flow to settle insurance claims as they come due. Exchange rate risk is managed by the risk management division of the life insurance subsidiary based on the policies for exchange rate risk management that specify details such as risk management methods and procedures. The division periodically reports the status of each risk to the life insurance subsidiary’s Board of Directors and Executive Committee. Equity market price fluctuation risk Equity market price fluctuation risk is managed by the risk management division of the life insurance subsidiary based on the policies for equity market price fluctuation risk management that specify details such as risk management methods and procedures. The division periodically reports the status of each risk to the life insurance subsidiary’s Board of Directors and Executive Committee. Derivative transactions are managed by the risk management division of the life insurance subsidiary based on the policies for derivative transactions that specify details such as risk management methods and procedures. The division periodically reports the status of each risk to the life insurance subsidiary’s Board of Directors and Executive Committee. For the purpose of pursuing a stable and sustainable increase of corporate value, in the life insurance business, Sony uses Market Consistent Embedded Value (“MCEV”), which is an indicator used to support the analysis of the value of a life insurance business and is compliant with the European Insurance CFO Forum Market Consistent Embedded Value Principles© (“MCEV Principles”). MCEV is also used for sensitivity analysis of market risk and insurance risk.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES (5)MCEV represents the present value of the current and future distributable earnings to shareholders generated from assets allocated to the covered business after sufficient allowance for the aggregate risks in the covered business. MCEV consists of the adjusted net worth and the value of the existing business. Adjusted net worth is the amount of assets allocated to the covered business as of the valuation date and is calculated as the amount of its market value in excess of statutory policy reserves and other liabilities. The value of the existing business consists of the present value of certainty-equivalent profit, the time value of options and guarantees, frictional costs and the cost ofnon-hedgeable risks. The main assumptions, including mortality rates, morbidity rates, lapse and surrender rates, and operating expense rates, were developed based on best estimates by product. The Board of Directors of the life insurance subsidiary has confirmed that, with the exception of certain noncompliance items, the MCEV presented below has been produced following the methodology set out in the MCEV Principles. The main noncompliance item referred to above is the reference rate, which is used in the calculations and has been defined as the government bond nominal spot rate curve rather than the swap rate curve as stipulated in the MCEV Principles. MCEV is not an estimate of “fair value” as it does not include the value of new businesses to be sold in the future and does not include thenon-life insurance business, such as the property and casualty insurance business and the banking business. The calculation of MCEV is based on numerous assumptions with respect to economic conditions, operating conditions, taxes and other matters, many of which are beyond Sony’s control. In general, deviations between projection assumptions and actual experience in the future are to be expected and such deviations may materially impact the value calculated. The tables below show the sensitivities of changing the underlying assumptions of MCEV as of March 31, 2022 and 2023. | | | | | | | | | | | | | | | | | | | | | | | Changes in assumptions, etc. | | | | | | | | | | | | | | | No change | | | 2,066,357 | | | | — | | | | — | | | | 50bp decrease | | | 2,107,521 | | | | 41,164 | | | | 1.99 | % | | | 50bp increase | | | 2,004,841 | | | | (61,516 | ) | | | (2.98 | %) | Stock / Real estate market value | | 10% decrease | | | 2,049,089 | | | | (17,268 | ) | | | (0.84 | %) | | | 10% decrease | | | 2,097,153 | | | | 30,796 | | | | 1.49 | % | | | 10% decrease | | | 2,083,260 | | | | 16,903 | | | | 0.82 | % | Mortality rates (death protection) | | 5% decrease | | | 2,136,304 | | | | 69,948 | | | | 3.39 | % | Mortality rates (third sector / annuity products) | | 5% decrease | | | 2,052,870 | | | | (13,487 | ) | | | (0.65 | %) | | | 5% decrease | | | 2,136,413 | | | | 70,057 | | | | 3.39 | % | | | 10% appreciation of the Yen | | | 2,051,249 | | | | (15,108 | ) | | | (0.73 | %) |
| | | | | | | | | | | | | | | | | | | | | | | Changes in assumptions, etc. | | | | | | | | | | | | | | | No change | | | 2,121,135 | | | | — | | | | — | | | | 50bp decrease | | | 2,244,971 | | | | 123,836 | | | | 5.84 | % | | | 50bp increase | | | 1,990,132 | | | | (131,003 | ) | | | (6.18 | %) | Stock / Real estate market value | | 10% decrease | | | 2,103,460 | | | | (17,675 | ) | | | (0.83 | % ) | | | 10% decrease | | | 2,158,765 | | | | 37,630 | | | | 1.77 | % | | | 10% decrease | | | 2,182,037 | | | | 60,902 | | | | 2.87 | % | Mortality rates (death protection) | | 5% decrease | | | 2,191,177 | | | | 70,042 | | | | 3.30 | % | Mortality rates (third sector / annuity products) | | 5% decrease | | | 2,110,640 | | | | (10,495 | ) | | | (0.49 | %) | | | 5% decrease | | | 2,184,127 | | | | 62,992 | | | | 2.97 | % | | | 10% appreciation of the Yen | | | 2,118,499 | | | | (2,636 | ) | | | (0.12 | %) |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | Insurance and market risks
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Risk management policy and exposure |
In line with liquidity risk management policies, the accounting division of each insurance subsidiary prepares and updates cash flow plans in a timely manner based on the reports from departments and manages cash flows, and the risk management division of each insurance subsidiary manages the liquidity risk. The accounting division and risk management division periodically or as needed report such information to each insurance subsidiary’s Board of Directors and Executive Committee. The life insurance subsidiary manages various market-related risks in the following manner:(b)
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The following table summarizes the estimated timing of the remaining undiscounted net cash flows from insurance contract liabilities and the contractual timing of the remaining undiscounted cash flows arising from securities held in the insurance business as of March 31, 2022 and 2023. The cash flows of insurance liabilities are based on assumptions regarding morbidity rates, mortality rates, and lapse rates, which are consistent with the estimates used for the carrying amounts. (a) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Insurance contract liabilities | | | 25,561,549 | | | | — | | | | 165,028 | | | | 155,586 | | | | 198,370 | | | | 234,987 | | | | 263,679 | | | | 24,543,899 | | Securities held in the insurance business | | | 18,536,483 | | | | 2,008,071 | | | | 656,948 | | | | 223,111 | | | | 348,527 | | | | 335,791 | | | | 311,466 | | | | 14,652,569 | |
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| | Insurance contract liabilities | | | 27,737,139 | | | | — | | | | 165,746 | | | | 153,881 | | | | 198,154 | | | | 224,698 | | | | 263,708 | | | | 26,730,952 | | Securities held in the insurance business | | | 19,640,244 | | | | 2,408,401 | | | | 636,352 | | | | 367,283 | | | | 345,113 | | | | 322,176 | | | | 428,997 | | | | 15,131,922 | |
Since the total of the above estimated amounts is the amount before discounting, it exceeds the amount of insurance contract liabilities and securities which is included in investments and advances in the Financial Services segment shown in the consolidated statements of financial position. | Insurance risk management
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Insurance riskShort-term borrowings and long-term debt
With respect to insurance underwriting risk, based on the level of policy reserves and capital levels, the life insurance subsidiary manages the insurance portfolio appropriately, such as setting policy limits for each type of insurance as necessary. In addition, underwriting standards, reinsurance standards, reinsurance company selection standards, and standards for revising and abolishing each product are clearly defined as internal rules and are regularly reviewed.
Concentration of insurance risk
The insurance contract portfolio does not have excessive concentration risk.
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Short-term borrowings and long-term debt are comprised of the following: | | | | | | | | | | | | | | | | | | |
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| | | | | | | | 1,976,553 | | | | 0.18 | % | | | | | | | | | | | | | | | | | | | | | 693,603 | | | | 0.70 | % | | | 2022-2056 | | | | | 189,608 | | | | 0.25 | % | | | 2022-2029 | | Unsecured zero coupon convertible bonds | | | 26,495 | | | | — | % | | | 2022 | | | | | 465,349 | | | | 2.10 | % | | | | | | | | | | | | | | | | | | | | | 1,375,055 | | | | | | | | | | Less — Portion due within one year | | | 171,409 | | | | | | | | | | | | | | | | | | | | | | | | | | 1,203,646 | | | | | | | | | | | | | | | | | | | | | | |
Interest rate risk management
Interest rate risk is managed by the risk management division based on the policies for interest rate risk management that specify details such as risk management methods and procedures. Based on ALM policies that are determined through such methods as deliberation by the life insurance subsidiary’s Executive Committee, the subsidiary determines and confirms actual risk conditions with its Board of Directors. As part of the ALM management, the life insurance subsidiary invests in financial assets that match the characteristics of the insurance contract obligations, and thereby reduces interest rate risk as much as possible. Through the purchase and sale of financial assets included in their portfolio, the interest rate sensitivity (duration) of financial assets and insurance contract obligations is matched as much as possible so that they ensure sufficient cash flow to settle insurance claims as they come due.
Exchange rate risk is managed by the risk management division based on the policies for exchange rate risk management that specify details such as risk management methods and procedures. The division periodically reports such information to the life insurance subsidiary’s Board of Directors and Executive Committee.
Equity market price fluctuation risk
Equity market price fluctuation risk is managed by the risk management division based on the policies for equity market price fluctuation risk management that specify details such as risk management methods and procedures. The division periodically reports such information to the life insurance subsidiary’s Board of Directors and Executive Committee.
Derivative transactions are managed by the risk management division based on the policies for derivative transactions that specify details such as risk management methods and procedures. The division periodically reports such information to the life insurance subsidiary’s Board of Directors and Executive Committee.
For the purpose of pursuing a stable and sustainable increase of corporate value, in the life insurance business Sony uses Market Consistent Embedded Value (“MCEV”), which is an indicator used to support the analysis of the value of a life insurance business and is compliant with the European Insurance CFO Forum Market Consistent Embedded Value Principles©
(“MCEV Principles”). MCEV is also used for sensitivity analysis of market risk and insurance risk.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES MCEV represents the present value of the current and future distributable earnings to shareholders generated from assets allocated to the covered business after sufficient allowance for the aggregate risks in the covered business. MCEV consists of the adjusted net worth and the value of the existing business. Adjusted net worth is the amount of assets allocated to the covered business as of the valuation date and is calculated as the amount of its market value in excess of statutory policy reserves and other liabilities. The value of the existing business consists of the present value of certainty-equivalent profit, the time value of options and guarantees, frictional costs and the cost ofnon-hedgeable
risks. The main assumptions, including mortality rates, morbidity rates, lapse and surrender rates, and operating expense rates, were developed based on best estimates by product. The Board of Directors of the life insurance subsidiary has confirmed that, with the exception of certain noncompliance items, the MCEV presented below has been produced following the methodology set out in the MCEV Principles. The main noncompliance item referred to above is the reference rate, which is used in the calculations and has been defined as the government bond nominal spot rate curve rather than the swap rate curve as stipulated in the MCEV Principles.MCEV is not an estimate of “fair value” as it does not include the value of new businesses to be sold in the future and does not include thenon-life
insurance business, such as the property and casualty insurance business and the banking business. The calculation of MCEV is based on numerous assumptions with respect to economic conditions, operating conditions, taxes and other matters, many of which are beyond Sony’s control. In general, deviations between projection assumptions and actual experience in the future are to be expected and such deviations may materially impact the value calculated.The tables below show the sensitivities of changing the underlying assumptions of MCEV as of April 1, 2020, March 31, 2021 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | Changes in assumptions, etc. | | | | | | | | | | | | | | | No change | | | 1,713,544 | | | | — | | | | — | | | | 50bp decrease | | | 1,675,351 | | | | (38,193 | ) | | | (2.23% | ) | | | 50bp increase | | | 1,723,260 | | | | 9,716 | | | | 0.57% | | Stock/Real estate market value | | 10% decrease | | | 1,687,104 | | | | (26,439 | ) | | | (1.54% | ) | | | 10% decrease | | | 1,742,146 | | | | 28,603 | | | | 1.67% | | | | 10% decrease | | | 1,661,415 | | | | (52,128 | ) | | | (3.04% | ) | Mortality rates (death protection) | | 5% decrease | | | 1,781,851 | | | | 68,308 | | | | 3.99% | | Mortality rates (third sector /annuity products) | | 5% decrease | | | 1,697,478 | | | | (16,066 | ) | | | (0.94% | ) | | | 5% decrease | | | 1,786,439 | | | | 72,895 | | | | 4.25% | | | | 10% appreciation of the Yen | | | 1,684,219 | | | | (29,324 | ) | | | (1.71% | ) |
| | | | | | | | | | | | | | | | | | | | | | | Changes in assumptions, etc. | | | | | | | | | | | | | | | No change | | | 1,966,570 | | | | — | | | | — | | | | 50bp decrease | | | 1,972,839 | | | | 6,269 | | | | 0.32% | | | | 50bp increase | | | 1,936,227 | | | | (30,343 | ) | | | (1.54% | ) | Stock/Real estate market value | | 10% decrease | | | 1,942,875 | | | | (23,695 | ) | | | (1.20% | ) | | | 10% decrease | | | 1,994,729 | | | | 28,158 | | | | 1.43% | | | | 10% decrease | | | 1,965,268 | | | | (1,302 | ) | | | (0.07% | ) | Mortality rates (death protection) | | 5% decrease | | | 2,032,004 | | | | 65,434 | | | | 3.33% | | Mortality rates (third sector /annuity products) | | 5% decrease | | | 1,952,436 | | | | (14,134 | ) | | | (0.72% | ) | | | 5% decrease | | | 2,038,626 | | | | 72,055 | | | | 3.66% | | | | 10% appreciation of the Yen | | | 1,941,841 | | | | (24,729 | ) | | | (1.26% | ) |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | Changes in assumptions, etc. | | | | | | | | | | | | | | | No change | | | 2,066,357 | | | | — | | | | — | | | | 50bp decrease | | | 2,107,521 | | | | 41,164 | | | | 1.99% | | | | 50bp increase | | | 2,004,841 | | | | (61,516 | ) | | | (2.98% | ) | Stock/Real estate market value | | 10% decrease | | | 2,049,089 | | | | (17,268 | ) | | | (0.84% | ) | | | 10% decrease | | | 2,097,153 | | | | 30,796 | | | | 1.49% | | | | 10% decrease | | | 2,083,260 | | | | 16,903 | | | | 0.82% | | Mortality rates (death protection) | | 5% decrease | | | 2,136,304 | | | | 69,948 | | | | 3.39% | | Mortality rates (third sector /annuity products) | | 5% decrease | | | 2,052,870 | | | | (13,487 | ) | | | (0.65% | ) | | | 5% decrease | | | 2,136,413 | | | | 70,057 | | | | 3.39% | | | | 10% appreciation of the Yen | | | 2,051,249 | | | | (15,108 | ) | | | (0.73% | ) |
| Risk management policy and exposure
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In line with liquidity risk management policies, the accounting division of each insurance subsidiary prepares and updates cash flow plans in a timely manner based on the reports from departments and manages cash flows, and the risk management division of each insurance subsidiary manages the liquidity risk. The accounting division and risk management division periodically or as needed report such information to each insurance subsidiary’s Board of Directors and Executive Committee. | | | | | | | | | | | | | | | | | | |
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| | | | | | | | 1,914,934 | | | | 1.89 | % | | | | | | | | | | | | | | | | | | | | | 1,074,060 | | | | 1.70 | % | | | 2023-2056 | | | | | 349,332 | | | | 0.30 | % | | | 2023-2029 | | | | | 532,246 | | | | 2.35 | % | | | | | | | | | | | | | | | | | | | | | 1,955,638 | | | | | | | | | | Less — Portion due within one year | | | 187,942 | | | | | | | | | | | | | | | | | | | | | | | | | | 1,767,696 | | | | | | | | | | | | | | | | | | | | | | |
the Financial Services segment, Sony pledged assets as collateral for short-term borrowings and long-term debt and the pledged assets are comprised of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,490,663 | | | | 1,678,553 | | Housing loans in the banking business | | | 782,175 | | | | 829,659 | |
addition to the above, in the Financial Services segment, Sony pledged securities forsecurities-for-securities lending transactions and the pledged securities are as follows: , in the Financial Services segment, Sony pledged securities as collateral for cash settlements, variation margins of futures markets and certain other purposes and the pledged securities are as follows: The following table summarizes the estimated timing of the remaining undiscounted net cash flows from insurance contract liabilities and the contractual timing of the remaining undiscounted cash flows arising from securities held by the insurance subsidiaries as of April 1, 2020, March 31, 2021 and 2022. The cash flows of insurance liabilities are based on assumptions regarding morbidity rates, mortality rates, and lapse rates, which are consistent with the estimates used for the carrying amounts.July 21, 2015, Sony issued 120,000 million yen of 130% Callable Unsecured Zero Coupon Convertible Bonds due on September 28, 2022 (the “Zero Coupon Convertible Bonds”). The bondholders we re entitled to convert the Zero Coupon Convertible Bonds into shares of common stock from September 1, 2015 to September 28, 2022, and the initial conversion price was 5,008 yen per share. The conversion price is subject to anti-dilution provisions, where the conversion price is adjusted in certain cases such as the issuance or disposal of the shares of Sony Group Corporation’s common stock at below market price, stock splits, bonus issues of shares, and dividends in excess of 25 yen per common share per fiscal year. In addition, an early redemption is triggered upon the occurrence of certain corporate events including a merger or corporate split, and the completion of a takeover bid resulting in the delisting of the shares of common stock of Sony Group Corporation. The conversion price is reduced for a certain period prior to the early redemption date, which is determined by a formula that is based on time to maturity and Sony’s common stock price, in order to compensate bondholders for the time value up to the original maturity date. The reduced conversion price ranged from 3,526.5 yen to 5,008 yen per share. The conversion price has been adjusted to 4,952.8 yen per common share since June 10, 2022 because the payment of the total annual dividend per common share for the fiscal year ended March 31, 2022 was 65 yen, which is in excess of 25 yen. At the early redemption date, the remaining Zero Coupon Convertible Bonds would be redeemed at 100% of the principal amount. The conversion right is bifurcated from the host contract and classified as equity. Sony had the option to redeem all of the Zero Coupon Convertible Bonds outstanding at 100% of the principal amount on or after July 21, 2020, if the closing price per share of Sony Group Corporation’s common stock on the Tokyo Stock Exchange was 130% or more of the conversion price of the Zero Coupon
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES applicable on each trading day for 20 consecutive trading days. As the option is considered closely related to the host contract, Sony does not bifurcate the option from the host contract. were no significant adverse debt covenants under the Zero Coupon Convertible Bonds. Sony redeemed the Zero Coupon Convertible Bonds at maturity on September 30, 2022. In August and October 2022, in order to enhance liquidity, Sony executed an approximate 1,175 m illion U.S. dollar bank loan from a group of banks with three, five andten-year maturity terms for the purpose of covering the consideration for the acquisition of 100% of the equity interest in Ellation, a subsidiary of AT&T Inc., which operates the anime business “Crunchyroll,” in August 2021. This bank loan utilizes theco-financing facility of Japan Bank for International Cooperation (“JBIC”), which aims to facilitate overseas mergers and acquisitions by Japanese companies. Approximately 60%, or 705 million U.S. dollars, is from the JBIC and was borrowed in U.S. dollars in October 2022, and approximately 40%, or 70,000 illion yen (approximately 470 m illion U.S. dollars) is from Japanese private banks and was borrowed in yen in August 2022. In December 2022, Sony Group Corporation issued unsecured straight bonds in the total principal amount of 150,000 m illion yen. Sony Group Corporation used all of the proceeds of the issued bonds for the repayment of CP by the end of December 2022. There are no significant adverse debt covenants or cross-default provisions related to the other short-term borrowings and long-term debt. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Insurance contract liabilities | | | 17,292,920 | | | | — | | | | 58,958 | | | | 79,164 | | | | 136,924 | | | | 178,881 | | | | 223,072 | | | | 16,615,921 | | Securities held by insurance subsidiaries | | | 15,459,087 | | | | 1,005,229 | | | | 645,257 | | | | 188,889 | | | | 187,273 | | | | 238,590 | | | | 352,546 | | | | 12,841,303 | |
| Derivative instruments and hedging activities |
Sony has certain financial instruments including financial assets and liabilities acquired in the normal course of business. Such financial instruments are exposed to market risk arising from the changes in foreign currency exchange rates and interest rates. In applying a consistent risk management strategy for the purpose of reducing such risk, Sony uses derivative financial instruments, which include foreign exchange forward contracts, swap agreements, currency option contracts, and interest rate swap agreements (including interest rate and currency swap agreements). Certain other derivative financial instruments are entered into in the Financial Services segment for ALM purposes. These instruments are executed with creditworthy financial institutions, and virtually all foreign currency contracts are denominated in U.S. dollars, euros and other currencies of major countries. Other than derivatives utilized in the Financial Services segment for ALM, Sony does not use derivative financial instruments for trading or speculative purposes. These derivative transactions utilized for ALM in the Financial Services segment are executed within certain limits in accordance with an internal risk management policy. A description of the purpose and classification of the derivative financial instruments held by Sony is as follows: Foreign exchange forward contracts, swap agreements and currency option contracts Foreign exchange forward contracts, swap agreements and purchased and written foreign currency option contracts are utilized primarily to limit the exposure affected by changes in foreign currency exchange rates on cash flows generated or anticipated by Sony’s transactions and accounts receivable and payable denominated in foreign currencies. The majority of written foreign currency option contracts are a part of range forward contract arrangements and expire in the same month with the corresponding purchased foreign currency option contracts. Sony also entered into foreign exchange forward contracts and foreign exchange range forward contracts which effectively fixed the cash flows from certain forecasted purchase and sale transactions denominated in foreign currencies for the fiscal years ended March 31, 2021, 2022 and 2023. The ineffective portions of the hedging relationships were not significant. Accordingly, these derivatives have been designated as cash flow hedges. Foreign exchange forward contracts and foreign currency option contracts that do not qualify as hedges are measured at fair value with changes in value recognized in financial income and financial expenses. Foreign exchange forward contracts, foreign currency option contracts and swap agreements held by certain subsidiaries in the Financial Services segment are measured at fair value with changes in value recognized in financial services
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Interest rate swap agreements (including interest rate and currency swap agreements) Interest rate swap agreements are utilized primarily to lower funding costs, to diversify sources of funding and to limit Sony’s exposure associated with underlying borrowings and debt securities resulting from adverse fluctuations in interest rates, foreign currency exchange rates and changes in fair values. Interest rate swap agreements entered into in the Financial Services segment are used for reducing the risk arising from the changes in the fair value of fixed rate debt securities. Certain subsidiaries in the Financial Services segment have interest rate swap agreements as part of their ALM, which are measured at fair value with changes in value recognized in financial services revenue. Any other interest rate swap agreements that do not qualify as hedges, which are used for reducing the risk arising from changes of variable rate debt, are measured at fair value with changes in value recognized in financial income and financial expenses. Certain subsidiaries in the Financial Services segment have equity future contracts, equity swap agreements, bond future contracts, commodity future contracts, interest rate swaption agreements, other currency contracts and hybrid financial instruments as part of their ALM, which arewith changes in value recognized in financial services revenue. The hybrid financial instruments, disclosed in Note 5 as debt securities, contained embedded derivatives that are not required to be bifurcated because the entire instruments are measured at fair value. The estimated fair values of Sony’s outstanding derivative instruments are sum marized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | Interest rate swap agreements | | | 26,795 | | | | 6,455 | | | | 43,464 | | | | 3,139 | | Interest rate swaptions agreements | | | — | | | | 1,075 | | | | 380 | | | | 2,517 | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | Foreign exchange forward contracts | | | 14,687 | | | | 34,284 | | | | 12,496 | | | | 12,257 | | | | | 11,897 | | | | 925 | | | | 3,774 | | | | 5,781 | | Currency option contracts purchased | | | 42 | | | | — | | | | 508 | | | | 835 | | Currency option contracts written | | | — | | | | 172 | | | | — | | | | 5 | | | | | 3,578 | | | | 1,201 | | | | 4,540 | | | | 998 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 11,903 | | | | 290 | | | | 3,321 | | | | | — | | | | 16,105 | | | | — | | | | 5,270 | | Option contracts purchased | | | 4,024 | | | | — | | | | 4,692 | | | | — | | | | | | | | | | | | | | | | | | | | | | 61,023 | | | | 72,120 | | | | 70,144 | | | | 34,123 | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The estimated fair values and maturity analysis for notional amounts of Sony’s outstanding derivative instruments which are designated as hedging instruments are summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flow hedging relationships | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange forward contracts | | | | | | | — | | | | | | | | — | | | | | | | | Current liabilities: Other financial liabilities | | | | | 115.3 | | | | — | | | | | | | | | | | | | | | | | | Currency option bought contracts | | | 4,830 | | | | — | | | | 4,830 | | | | 28 | | | | — | | | | Current assets: Other financial assets | | | | | 115.0 | | | | — | | | | | | | | | | | | | | | | | | Currency option sold contracts | | | 4,975 | | | | — | | | | 4,975 | | | | — | | | | 161 | | | | Current liabilities: Other financial liabilities | | | | | 118.5 | | | | — | | | | | | | | | | | | | | | | | | Interest rate swap agreements | | | — | | | | 146,778 | | | | 146,778 | | | | 17,987 | | | | — | | | | Non-current assets: Other financial assets | | | | | — | | | | 1.5 | % | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flow hedging relationships | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange forward contracts | | | | | | | — | | | | | | | | | | | | | | | | Current assets: Other financial assets | | | | | 131.3 | | | | — | | | | | | | | | | | | | | | | | | Currency option bought contracts | | | | | | | — | | | | | | | | | | | | | | | | Current assets: Other financial assets | | | | | 125.8 | | | | — | | | | | | | | | | | | | | | | | | Currency option sold contracts | | | 47,995 | | | | — | | | | 47,995 | | | | — | | | | 835 | | | | Current liabilities: Other financial liabilities | | | | | 131.9 | | | | — | | | | | | | | | | | | | | | | | | Interest rate swap agreements | | | — | | | | 159,918 | | | | 159,918 | | | | 28,513 | | | | — | | | | Non-current assets: Other financial assets | | | | | — | | | | 1.5 | % | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Changes in the fair value of hedging instruments related to cash flow hedges are recorded in accumulated other comprehensive income for the fiscal years ended March 31, 2022 and 2023. | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | Balance as of April 1, 2021 | | | (4,282 | ) | | | 5,581 | | | | 1,299 | | | | | | | | | | | | | | | Changes in fair value of hedging instruments recognized in other comprehensive income | | | (14,645 | ) | | | 6,942 | | | | (7,703 | ) | Reclassification adjustments to profit (loss) for the year *1,2 | | | 12,886 | | | | 1,643 | | | | 14,529 | | | | | 538 | | | | (2,629 | ) | | | (2,091 | ) | | | | | | | | | | | | | | Balance as of March 31, 2022 | | | (5,503 | ) | | | 11,537 | | | | 6,034 | | | | | | | | | | | | | | | Changes in fair value of hedging instruments recognized in other comprehensive income | | | (26,950 | ) | | | 13,975 | | | | (12,975 | ) | Reclassification adjustments to profit (loss) for the year *1,2 | | | 34,825 | | | | (4,012 | ) | | | 30,813 | | | | | (2,408 | ) | | | (3,051 | ) | | | (5,459 | ) | | | | | | | | | | | | | | Balance as of March 31, 2023 | | | (36 | ) | | | 18,449 | | | | 18,413 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | Insurance contract liabilities | | | 22,097,488 | | | | — | | | | 127,728 | | | | 148,972 | | | | 189,784 | | | | 224,574 | | | | 262,433 | | | | 21,143,997 | | Securities held by insurance subsidiaries | | | 17,014,630 | | | | 1,584,670 | | | | 670,402 | | | | 198,858 | | | | 245,184 | | | | 342,846 | | | | 328,947 | | | | 13,643,723 | |
*1 | In the consolidated statements of income, the amount reclassified to profit (loss) is included in sales for hedges of foreign exchange contracts and in financial expenses for hedges of interest rate contracts. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | Insurance contract liabilities | | | 25,561,549 | | | | — | | | | 165,028 | | | | 155,586 | | | | 198,370 | | | | 234,987 | | | | 263,679 | | | | 24,543,899 | | Securities held by insurance subsidiaries | | | 18,536,483 | | | | 2,008,071 | | | | 656,948 | | | | 223,111 | | | | 348,527 | | | | 335,791 | | | | 311,466 | | | | 14,652,569 | |
*2 | For the fiscal years ended March 31, 2022 and 2023, hedge ineffectiveness recognized in profit or loss was not material.
|
16. Offsetting of financial assets and financial liabilities Tables below show the gross amounts of financial assets and liabilities, amounts offset, and net amounts presented in the consolidated statements of financial position, as well as the financial assets and liabilities that are subject to enforceable master netting agreements or similar agreements, as of March 31, 2022 and 2023. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | | Gross amounts not offset in the
consolidated statements of
| | | | | | |
| | |
| | | | | | | | 37,847 | | | | — | | | | 37,847 | | | | 24,504 | | | | 10,782 | | | | 2,561 | | | | | 30,370 | | | | 26,739 | | | | 3,631 | | | | — | | | | — | | | | 3,631 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 68,217 | | | | 26,739 | | | | 41,478 | | | | 24,504 | | | | 10,782 | | | | 6,192 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 72,004 | | | | — | | | | 72,004 | | | | 33,514 | | | | 29,530 | | | | 8,960 | | | | | 60,056 | | | | 26,739 | | | | 33,317 | | | | — | | | | — | | | | 33,317 | | | | | 1,272,040 | | | | — | | | | 1,272,040 | | | | 1,269,188 | | | | — | | | | 2,852 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,404,100 | | | | 26,739 | | | | 1,377,361 | | | | 1,302,702 | | | | 29,530 | | | | 45,129 | | | | | | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross amounts not offset in the consolidated statements of | | | | | | | | | | | | | | | | | | 34,382 | | | | — | | | | 34,382 | | | | 16,430 | | | | 13,852 | | | | 4,100 | | | | | 175,872 | | | | 174,930 | | | | 942 | | | | — | | | | — | | | | 942 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | | 210,254 | | | | 174,930 | | | | 35,324 | | | | 16,430 | | | | 13,852 | | | | 5,042 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 31,997 | | | | — | | | | 31,997 | | | | 21,700 | | | | 5,216 | | | | 5,081 | | | | | 281,295 | | | | 174,930 | | | | 106,365 | | | | — | | | | — | | | | 106,365 | | | | | 1,557,652 | | | | — | | | | 1,557,652 | | | | 1,556,595 | | | | — | | | | 1,057 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 1,870,944 | | | | 174,930 | | | | 1,696,014 | | | | 1,578,295 | | | | 5,216 | | | | 112,503 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Certain subsidiaries have entered into master netting agreements or other similar agreements, which are mainly International Swaps and Derivatives Association (ISDA) Master Agreements. An ISDA Master Agreement is an agreement between two counterparties that may have multiple derivative contracts with each other, and such ISDA Master Agreement may provide for the net settlement of all or a specified group of these derivative contracts, through a single payment, in a single currency, in the event of a default on or affecting any one derivative contract, or a termination event affecting all or a specified group of derivative contracts. Master netting agreements create a right of set off, but the master netting agreements do not automatically provide for such set off. |
| Amounts offset in the consolidated statements of financial position are related to repurchase agreements of products. |
| Short-term borrowings relate to repurchase agreements (repos). |
| Defined benefit and severance plans |
Upon terminating employment, employees of Sony Group Corporation and its subsidiaries in Japan are entitled, under most circumstances, tolump-sum indemnities or pension payments as described below. Sony Group Corporation and certain of its subsidiaries’ pension plans utilize a point-based plan under which a point is added every year reflecting the individual employee’s performance over that year. Under the point-based plan, the amount of payment is determined based on the sum of cumulative points from past services and interest points earned on the cumulative points regardless of whether or not the employee is voluntarily retiring. Under the plans, in general, the defined benefits cover 65% of the indemnities under existing regulations to employees. The remaining indemnities are covered by severance payments by the companies. The pension benefits are payable at the option of the retiring employee either in alump-sum amount or monthly pension payments. Contributions to the plans are funded through several financial institutions in accordance with the applicable laws and regulations. From April 1, 2012, Sony Group Corporation and substantially all of its subsidiaries in Japan have modified existing defined benefit pension plans such that life annuities will no longer accrue additional service benefits, with those participants instead accruing fixed-term annuities. The defined benefit pension plans were closed to new participants and a defined contribution plan was also introduced. From October 1, 2019, Sony Group Corporation and substantially all of its subsidiaries in Japan have amended their defined benefit pension plans and have implemented defined contribution plans for all employees other than those employees that had retired before the amendments. In addition, several of Sony’s foreign subsidiaries have defined benefit pension plans or severance indemnity plans, which cover substantially all of their employees. Under such plans, the related cost of benefits is currently funded or accrued. Benefits awarded under these plans are based primarily on the current rate of pay and length of service.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Net defined benefit liability (asset) recognized in the consolidated statements of financial position Amounts recognized in the consolidated statements of financial position are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Present value of defined benefit obligations | | | 614,763 | | | | 573,143 | | | | 277,903 | | | | 124,702 | | Fair value of plan assets | | | (474,933 | ) | | | (447,747 | ) | | | (198,791 | ) | | | (56,987 | ) | The impact of minimum funding requirement and asset ceiling | | | 4,870 | | | | 6,897 | | | | 2,491 | | | | 3,455 | | | | | | | | | | | | | | | | | | | Net amount | | | 144,700 | | | | 132,293 | | | | 81,603 | | | | 71,170 | | | | | | | | | | | | | | | | | | | Amount recognized in the consolidated statements of financial position | | | | | | | | | | | | | | | | | Net defined benefit asset | | | (21,057 | ) | | | (28,334 | ) | | | (6,544 | ) | | | (1,775 | ) | Net defined benefit liability | | | 165,757 | | | | 160,627 | | | | 88,147 | | | | 72,945 | | | | | | | | | | | | | | | | | | | Net amount | | | 144,700 | | | | 132,293 | | | | 81,603 | | | | 71,170 | | | | | | | | | | | | | | | | | | |
Present value of defined benefit obligations The changes in the defined benefit o bligations for the fiscal years ended March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | Beginning balance of the fiscal year | | | 640,061 | | | | 614,763 | | | | 371,239 | | | | 277,903 | | | | | | | | | | | | | | | | | | | Current service cost | | | 12,868 | | | | 12,660 | | | | 2,424 | | | | 2,319 | | Past service cost | | | 4 | | | | 5 | | | | (34 | ) | | | (365 | ) | Interest cost | | | 3,751 | | | | 4,367 | | | | 5,117 | | | | 4,623 | | Remeasurements: | | | | | | | | | | | | | | | | | Change in demographic assumptions | | | (536 | ) | | | 2,974 | | | | 630 | | | | (458 | ) | Change in financial assumptions | | | (8,594 | ) | | | (27,314 | ) | | | (16,789 | ) | | | (60,179 | ) | Other | | | (95 | ) | | | (569 | ) | | | (91 | ) | | | (940 | ) | Translation adjustments | | | — | | | | — | | | | 19,372 | | | | 11,213 | | Plan participants’ contributions | | | — | | | | — | | | | 333 | | | | 516 | | Benefits paid | | | (32,909 | ) | | | (33,741 | ) | | | (38,923 | ) | | | (9,798 | ) | Curtailments and settlements * | | | — | | | | — | | | | (65,375 | ) | | | (100,132 | ) | Other | | | 213 | | | | (2 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | Ending balance of the fiscal year | | | 614,763 | | | | 573,143 | | | | 277,903 | | | | 124,702 | | | | | | | | | | | | | | | | | | |
* | F-74Curtailments and settlements of the foreign plans for the fiscal year ended March 31, 2022 relate mainly to the termination of the defined benefit pension plan at certain U.S. subsidiaries. Curtailments and settlements of the foreign plans for the fiscal year ended March 31, 2023 relate mainly to the termination of the defined benefit pension plan at certain U.K. subsidi aries. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The weighted average duration of defined benefit obligations for the fiscal years ended March 31, 2022 and 2023 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average duration of defined benefit obligations | | | 11.5 years | | | | 11.2 years | | | | 15.7 years | | | | 12.2 years | |
The significant actuarial assumptions used to determine the present value of defined benefit obligations as of March 31, 2022 and 2023 are as follows: The sensitivities of the defined benefit obligations to changes in the significant weighted-average actuarial assumptions are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,069 | | | | 16,042 | | | | 11,055 | | | | 3,487 | | | | | (15,372 | ) | | | (13,201 | ) | | | (10,439 | ) | | | (3,316 | ) |
The sensitivity analyses are calculated using the same method used to determine the defined benefit liability recognized in the consolidated statements of financial position while holding all other assumptions consistent. Fair value of plan assets Sony’s pension investment policy recognizes the expected growth and the variability risk associated with the long-term nature of pension liabilities, the returns and risks of diversification across asset classes, and the correlation among assets. The asset allocations are designed to maximize returns consistent with levels of liquidity and investment risk that are considered prudent and reasonable. While the pension investment policy gives appropriate consideration to recent market performance and historical returns, the investment assumptions utilized by Sony are designed to achieve a long-term return consistent with the long-term nature of the corresponding pension liabilities. The investment objectives of Sony’s plan assets are designed to generate returns that will enable the plans to meet their future obligations. The precise amount for which these obligations will be settled depends on future events, including the retirement dates and life expectancy of the plans’ participants. The obligations are estimated using actuarial assumptions, based on current economic conditions and other pertinent factors. Sony’s investment strategy balances the requirement to generate returns, using potentially higher yielding assets such as equity securities, with the need to control risk in the portfolio with less volatile assets, such as fixed-income securities. Risks include, among others, inflation, volatility in equity values and changes in interest rates that could negatively impact the funding level of the plans, thereby increasing their dependence on contributions from Sony. To mitigate any potential concentration risk of plan assets, thorough consideration is given to balancing the portfolio among industry sectors and geographies, taking into account interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. The target allocations as of March 31, 2023 , are, as a result of Sony’s asset liability management, 15% (202: 16%) of equity securities, 53% (2022: 52%) of fixed income securities and 32% (2022 : 32%) of other investments for the pension plans of Sony Group Corporation and most of its subsidiaries in Japan, and, on a weighted average basis, 1% (2022 : 1%) of equity securities, 28% (2022 : 22%) of fixed income securities and 71% (2022 : 77%) of other investments for the pension plans of foreign subsidiaries.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The changes in the plan assets for the fiscal years ended March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | Beginning balance of the fiscal year | | | 476,411 | | | | 474,933 | | | | 288,394 | | | | 198,791 | | | | | | | | | | | | | | | | | | | | | | 3,026 | | | | 3,649 | | | | 3,955 | | | | 2,804 | | | | | | | | | | | | | | | | | | | Return on plan assets excluding interest income | | | 17,617 | | | | (13,378 | ) | | | (10,121 | ) | | | (43,173 | ) | | | | — | | | | — | | | | 13,880 | | | | 5,760 | | | | | 2,476 | | | | 5,650 | | | | 4,573 | | | | 3,444 | | Plan participants’ contributions | | | — | | | | — | | | | 333 | | | | 516 | | | | | (24,597 | ) | | | (23,107 | ) | | | (37,545 | ) | | | (8,240 | ) | | | | — | | | | — | | | | (5,005 | ) | | | — | | Curtailments and settlements * | | | — | | | | — | | | | (59,673 | ) | | | (102,915 | ) | | | | | | | | | | | | | | | | | | Ending balance of the fiscal year | | | 474,933 | | | | 447,747 | | | | 198,791 | | | | 56,987 | | | | | | | | | | | | | | | | | | |
* | Curtailments and settlements of the foreign plans for the fiscal year ended March 31, 2022 relate mainly to the termination of the defined benefit pension plan at certain U.S. subsidiaries. Curtailments and settlements of the foreign plans for the fiscal year ended March 31, 2023 relate mainly to the termination of the defined benefit pension plan at certain U.K. subsidiaries.
|
Sony makes contributions to its defined benefit pension plans as deemed appropriate by management after considering the fair value of plan assets, expected return on plan assets and the present value of defined benefit obligations. Sony expects to contribute approximately 2 billion yen to the Japanese plans and approximately 5 billion yen to the foreign plans during the fiscal year ending March 31, 2024. The fair values of the assets held by Japanese and foreign plans are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | Market price in active market | | | | | | | | | Cash and cash equivalents | | | 13,843 | | | | 13,843 | | | | — | | | | | 31,660 | | | | 28,175 | | | | 3,485 | | | | | | | | | | | | | | | | | | 10,005 | | | | 1,122 | | | | 8,883 | | | | | 4,222 | | | | 31 | | | | 4,191 | | | | | 316,319 | | | | — | | | | 316,319 | | | | | 49,777 | | | | — | | | | 49,777 | | | | | 49,107 | | | | — | | | | 49,107 | | | | | | | | | | | | | | | | | | 474,933 | | | | 43,171 | | | | 431,762 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | |
| | | Market price in active market | | | | | | | | | Cash and cash equivalents | | | 18,060 | | | | 18,060 | | | | — | | | | | 37,562 | | | | 33,335 | | | | 4,227 | | | | | | | | | | | | | | | | | | 10,369 | | | | 975 | | | | 9,394 | | | | | 4,587 | | | | 25 | | | | 4,562 | | | | | 287,978 | | | | — | | | | 287,978 | | | | | 40,612 | | | | — | | | | 40,612 | | | | | 48,579 | | | | — | | | | 48,579 | | | | | | | | | | | | | | | | | | 447,747 | | | | 52,395 | | | | 395,352 | | | | | | | | | | | | | | |
| *1 | Represents primarily Japanese equity securities. |
| *2 | Includes approximately 84% and 85% of debt securities issued by Japanese national and local governments, and 16% and 15%of debt securities issued by foreign national and local governments as of the fiscal years ended March 31, 2022 and 2023, respectively. |
| *3 | Includes debt securities issued by Japanese and foreign corporationand government related agencies. |
| *4 | Commingled funds represent pooled institutional investments, including primarily investment trusts. |
| | | | | | | | | | | | | | | | | | | | | | |
| | | Market price in active market | | | | | | | | | Cash and cash equivalents | | | 2,350 | | | | 2,350 | | | | — | | | | | 61 | | | | 61 | | | | — | | | | | | | | | | | | | | | | | | 19,141 | | | | — | | | | 19,141 | | | | | 23,546 | | | | — | | | | 23,546 | | | | | 63 | | | | — | | | | 63 | | | | | 129,084 | | | | 432 | | | | 128,652 | | | | | 22,316 | | | | — | | | | 22,316 | | | | | 2,230 | | | | 8 | | | | 2,222 | | | | | | | | | | | | | | | | | | 198,791 | | | | 2,851 | | | | 195,940 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | |
| | | Market price in active market | | | | | | | | | Cash and cash equivalents | | | 2,403 | | | | 2,403 | | | | — | | | | | 65 | | | | 65 | | | | — | | | | | | | | | | | | | | | | | | 2,135 | | | | — | | | | 2,135 | | | | | 12,052 | | | | — | | | | 12,052 | | | | | 61 | | | | — | | | | 61 | | | | | 19,401 | | | | 341 | | | | 19,060 | | | | | 18,113 | | | | — | | | | 18,113 | | | | | 2,757 | | | | 8 | | | | 2,749 | | | | | | | | | | | | | | | | | | 56,987 | | | | 2,817 | | | | 54,170 | | | | | | | | | | | | | | |
| *1 | Includes primarily foreign equity securities. |
| *2 | Includes primarily foreign government debt securities. |
| *3 | Includes primarily foreign corporate debt securities. |
| *4 | Represents annuity contracts with or without profit sharing and bulk insurance contracts. |
| *5 | Commingled funds represent pooled institutional investments, including primarily investment trusts. |
The impact of minimum funding requirement and asset ceiling The impact of minimum funding requirement and asset ceiling for the fiscal years ended March 31, 2022 and 2023 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | Beginning balance of the fiscal year | | | 3,990 | | | | 4,870 | | | | 13,156 | | | | 2,491 | | | | | | | | | | | | | | | | | | | | | | 25 | | | | 39 | | | | 187 | | | | 65 | | | | | | | | | | | | | | | | | | | Change in asset ceiling excluding interest income | | | 855 | | | | 1,988 | | | | (11,018 | ) | | | 811 | | Translation adjustments | | | — | | | | — | | | | 166 | | | | 88 | | | | | | | | | | | | | | | | | | | Ending balance of the fiscal year | | | 4,870 | | | | 6,897 | | | | 2,491 | | | | 3,455 | | | | | | | | | | | | | | | | | | |
| Defined contribution plans |
Total defined contribution expenses for the fiscal years ended March 31, 2021, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | 10,992 | | | | 11,137 | | | | 11,461 | | | | | 9,639 | | | | 11,154 | | | | 17,271 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Since the total of the above estimated amounts is the amount before discounting, it exceeds the amount of insurance contract liabilities and securities which is included in investments and advances in the Financial Services segment shown in the consolidated statements of financial position.
| Short-term borrowings and long-term debt
|
Short-term borrowings and long-term debt are comprised of the following:
| | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | 824,045 | | | | 0.74 | % | | | | | | | | | | | | | | | | | | | | | 254,916 | | | | 0.26 | % | | | 2020-2030 | | | | | 259,441 | | | | 0.29 | % | | | 2020-2029 | | Unsecured zero coupon convertible bonds | | | 117,359 | | | | — | % | | | 2022 | | | | | 406,237 | | | | 2.48 | % | | | | | | | | | | | | | | | | | | | | | 1,037,953 | | | | | | | | | | Less — Portion due within one year | | | 98,923 | | | | | | | | | | | | | | | | | | | | | | | | | | 939,030 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | 1,201,747 | | | | 0.14 | % | | | | | | | | | | | | | | | | | | | | | 526,790 | | | | 0.62 | % | | | 2021-2030 | | | | | 289,491 | | | | 0.28 | % | | | 2021-2029 | | Unsecured zero coupon convertible bonds | | | 40,738 | | | | — | % | | | 2022 | | | | | 402,023 | | | | 2.12 | % | | | | | | | | | | | | | | | | | | | | | 1,259,042 | | | | | | | | | | Less — Portion due within one year | | | 205,406 | | | | | | | | | | | | | | | | | | | | | | | | | | 1,053,636 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | 1,976,553 | | | | 0.18 | % | | | | | | | | | | | | | | | | | | | | | 693,603 | | | | 0.70 | % | | | 2022-2056 | | | | | 189,608 | | | | 0.25 | % | | | 2022-2029 | | Unsecured zero coupon convertible bonds | | | 26,495 | | | | — | % | | | 2022 | | | | | 465,349 | | | | 2.10 | % | | | | | | | | | | | | | | | | | | | | | 1,375,055 | | | | | | | | | | Less — Portion due within one year | | | 171,409 | | | | | | | | | | | | | | | | | | | | | | | | | | 1,203,646 | | | | | | | | | | | | | | | | | | | | | | |
Certain subsidiaries in the Financial Services segment pledged assets as collateral for short-term borrowings and long-term debt and the pledged assets are comprised of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 740,331 | | | | 1,036,855 | | | | 1,490,663 | | Housing loans in the banking business | | | 374,314 | | | | 553,722 | | | | 782,175 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
In addition to the above, certain subsidiaries in the Financial Services segment pledged securities forsecurities-for-securities
lending transactions and the pledged securities are as follows:Furthermore, pledged securities of certain subsidiaries in the Financial Services segment as collateral for cash settlements, variation margins of futures markets and certain other purposes are as follows:
On July 21, 2015, Sony issued 120,000 million yen of 130% Callable Unsecured Zero Coupon Convertible Bonds due on September 28, 2022 (the “Zero Coupon Convertible Bonds”). The bondholders are entitled to convert the Zero Coupon Convertible Bonds into shares of common stock from September 1, 2015 to September 28, 2022. The initial conversion price was 5,008 yen per share. The conversion price is subject to anti-dilution provisions, where the conversion price is adjusted in certain cases such as the issuance or disposal of the shares of Sony Group Corporation’s common stock at below market price, stock splits, bonus issues of shares, and dividends in excess of 25 yen per common share per fiscal year. In addition, an early redemption is triggered upon the occurrence of certain corporate events including a merger or corporate split, and the completion of a takeover bid resulting in the delisting of the shares of common stock of Sony Group Corporation. The conversion price is reduced for a certain period prior to the early redemption date, which is determined by a formula that is based on time to maturity and Sony’s common stock price, in order to compensate bondholders for the time value up to the original maturity date. The reduced conversion price ranges from 3,526.5 yen to 5,008 yen per share. The conversion price has been adjusted to 4,952.8 yen per common share since June 10, 2022 because the payment of the total annual dividend per common share for the fiscal year ended March 31, 2022 was 65 yen, which is in excess of 25 yen. At the early redemption date, the remaining Zero Coupon Convertible Bonds would be redeemed at 100% of the principal amount. The conversion right is bifurcated from the host contract and classified as equity.
Sony has the option to redeem all of the Zero Coupon Convertible Bonds outstanding at 100% of the principal amount on or after July 21, 2020, if the closing price per share of Sony Group Corporation’s common stock on the Tokyo Stock Exchange is 130% or more of the conversion price of the Zero Coupon Convertible Bonds applicable on each trading day for 20 consecutive trading days. As the option is considered closely related to the host contract, Sony does not bifurcate the option from the host contract.
There are no significant adverse debt covenants under the Zero Coupon Convertible Bonds.
There are no significant adverse debt covenants or cross-default provisions related to the other short-term borrowings and long-term debt.
| Derivative instruments and hedging activities
|
Sony has certain financial instruments including financial assets and liabilities acquired in the normal course of business. Such financial instruments are exposed to market risk arising from the changes in foreign currency exchange rates and interest rates. In applying a consistent risk management strategy for the purpose of reducing such risk, Sony uses derivative financial instruments, which include foreign exchange forward contracts, swap agreements, currency option contracts, and interest rate swap agreements (including interest rate and currency swap agreements). Certain other derivative financial instruments are entered into in the Financial Services segment for ALM purposes. These instruments are executed with creditworthy financial institutions, and virtually all foreign currency contracts are denominated in U.S. dollars, euros and other currencies of major countries. Other than derivatives utilized in the Financial Services segment for ALM, Sony does not use derivative financial instruments for trading or speculative purposes. These derivative transactions utilized for ALM in the Financial Services segment are executed within certain limits in accordance with an internal risk management policy.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | A description of the purpose and classification of the derivative financial instruments held by Sony is as follows:
Foreign exchange forward contracts, swap agreements and currency option contracts
Foreign exchange forward contracts, swap agreements and purchased and written foreign currency option contracts are utilized primarily to limit the exposure affected by changes in foreign currency exchange rates on cash flows generated or anticipated by Sony’s transactions and accounts receivable and payable denominated in foreign currencies. The majority of written foreign currency option contracts are a part of range forward contract arrangements and expire in the same month with the corresponding purchased foreign currency option contracts.
Sony also entered into foreign exchange forward contracts and foreign exchange range forward contracts which effectively fixed the cash flows from certain forecasted purchase and sale transactions denominated in foreign currencies for the fiscal years ended March 31, 2021 and 2022. The ineffective portions of the hedging relationships were not significant. Accordingly, these derivatives have been designated as cash flow hedges.
Foreign exchange forward contracts and foreign currency option contracts that do not qualify as hedges are measured at fair value with changes in value recognized in financial income and financial expenses.
Foreign exchange forward contracts, foreign currency option contracts and swap agreements held by certain subsidiaries in the Financial Services segment are measured at fair value with changes in value recognized in financial services revenue.
Interest rate swap agreements (including interest rate and currency swap agreements)
Interest rate swap agreements are utilized primarily to lower funding costs, to diversify sources of funding and to limit Sony’s exposure associated with underlying borrowings and debt securities resulting from adverse fluctuations in interest rates, foreign currency exchange rates and changes in fair values. Interest rate swap agreements entered into in the Financial Services segment are used for reducing the risk arising from the changes in the fair value of fixed rate debt securities.
Certain subsidiaries in the Financial Services segment have interest rate swap agreements as part of their ALM, which are measured at fair value with changes in value recognized in financial services revenue.
Any other interest rate swap agreements that do not qualify as hedges, which are used for reducing the risk arising from changes of variable rate debt, are measured at fair value with changes in value recognized in financial income and financial expenses.
Certain subsidiaries in the Financial Services segment have equity future contracts, equity swap agreements, bond future contracts, commodity future contracts, interest rate swaption agreements, other currency contracts and hybrid financial instruments as part of their ALM, which arewith changes in value recognized in financial services revenue. The hybrid financial instruments, disclosed in Note 5 as debt securities, contained embedded derivatives that are not required to be bifurcated because the entire instruments are measured at fair value.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The estimated fair values of Sony’s outstanding derivative instruments are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate swap agreements | | | 1,604 | | | | 17,621 | | | | 12,788 | | | | 14,757 | | | | 26,795 | | | | 6,455 | | Interest rate swaptions agreements | | | — | | | | 58 | | | | — | | | | 205 | | | | — | | | | 1,075 | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange forward contracts | | | 10,023 | | | | 6,822 | | | | 7,820 | | | | 13,241 | | | | 14,687 | | | | 34,284 | | | | | 6,020 | | | | 7,027 | | | | 4,912 | | | | 4,422 | | | | 11,897 | | | | 925 | | Currency option contracts purchased | | | 7 | | | | — | | | | 15 | | | | — | | | | 42 | | | | — | | Currency option contracts written | | | — | | | | 5 | | | | — | | | | 1,790 | | | | — | | | | 172 | | | | | 5,453 | | | | 2,482 | | | | 2,944 | | | | 780 | | | | 3,578 | | | | 1,201 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 605 | | | | 1,476 | | | | 240 | | | | 986 | | | | — | | | | 11,903 | | | | | 18,280 | | | | — | | | | — | | | | 4,171 | | | | — | | | | 16,105 | | Option contracts purchased | | | 4,081 | | | | — | | | | 10,177 | | | | — | | | | 4,024 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 391 | | | | 375 | | | | 17 | | | | 2 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 46,464 | | | | 35,866 | | | | 38,913 | | | | 40,354 | | | | 61,023 | | | | 72,120 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The estimated fair values and maturity analysis for notional amounts of Sony’s outstanding derivative instruments which are designated as hedging instruments are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flow hedging relationships | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange forward contracts | | | 173,398 | | | | — | | | | 173,398 | | | | 1,799 | | | | — | | | | Current assets: Other financial assets | | Average rate (JPY/USD) | | | 108.9 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flow hedging relationships | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange forward contracts | | | 100,177 | | | | — | | | | 100,177 | | | | — | | | | 4,221 | | | | Current liabilities:
Other financial liabilities | | Average rate (JPY/USD) | | | 106.0 | | | | — | | | | | | | | | | | | | | | | | | Currency option bought contracts | | | 32,754 | | | | — | | | | 32,754 | | | | 8 | | | | — | | | | Current assets: Other financial assets | | Average rate (JPY/USD) | | | 103.0 | | | | — | | | | | | | | | | | | | | | | | | Currency option sold contracts | | | 33,390 | | | | — | | | | 33,390 | | | | — | | | | 1,779 | | | | Current liabilities: Other financial liabilities | | Average rate (JPY/USD) | | | 105.0 | | | | — | | | | | | | | | | | | | | | | | | Interest rate swap agreements | | | — | | | | 132,852 | | | | 132,852 | | | | 10,438 | | | | — | | | | Non-current assets: Other financial assets | | | | | — | | | | 1.5 | % | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flow hedging relationships | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange forward contracts | | | 138,135 | | | | — | | | | 138,135 | | | | — | | | | 7,618 | | | | Current liabilities: Other financial liabilities | | Average rate (JPY/USD) | | | 115.3 | | | | — | | | | | | | | | | | | | | | | | | Currency option bought contracts | | | 4,830 | | | | — | | | | 4,830 | | | | 28 | | | | — | | | | Current assets : Other financial assets | | Average rate (JPY/USD) | | | 115.0 | | | | — | | | | | | | | | | | | | | | | | | Currency option sold contracts | | | 4,975 | | | | — | | | | 4,975 | | | | — | | | | 161 | | | | Current liabilities: Other financial liabilities | | Average rate (JPY/USD) | | | 118.5 | | | | — | | | | | | | | | | | | | | | | | | Interest rate swap agreements | | | — | | | | 146,778 | | | | 146,778 | | | | 17,987 | | | | — | | | | Non-current assets: Other financial assets | | | | | — | | | | 1.5 | % | | | | | | | | | | | | | | | | |
Changes in the fair value of hedging instruments related to cash flow hedges are recorded in accumulated other comprehensive income for the fiscal years ended March 31, 2021 and 2022.
| | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | Balance as of April 1, 2020 | | | 1,248 | | | | — | | | | 1,248 | | | | | | | | | | | | | | | Changes in fair value of hedging instruments recognized in other comprehensive income | | | (2,672 | ) | | | 10,153 | | | | 7,481 | | Reclassification adjustments to profit (loss) for the year *1 ,2 | | | (5,119 | ) | | | (2,109 | ) | | | (7,228 | ) | | | | 2,261 | | | | (2,463 | ) | | | (202 | ) | | | | | | | | | | | | | | Balance as of March 31, 2021 | | | (4,282 | ) | | | 5,581 | | | | 1,299 | | | | | | | | | | | | | | | Changes in fair value of hedging instruments recognized in other comprehensive income | | | (14,645 | ) | | | 6,942 | | | | (7,703 | ) | Reclassification adjustments to profit (loss) for the year *1,2 | | | 12,886 | | | | 1,643 | | | | 14,529 | | | | | 538 | | | | (2,629 | ) | | | (2,091 | ) | | | | | | | | | | | | | | Balance as of March 31, 2022 | | | (5,503 | ) | | | 11,537 | | | | 6,034 | | | | | | | | | | | | | | |
*1 | In the consolidated statements of income, the amount reclassified to profit (loss) is included in sales for hedges of foreign exchange contracts and in financialEmployee benefits expenses for hedges of interest rate contracts.
|
*2 | For the fiscal years ended March 31, 2021 and 2022, hedge ineffectiveness recognized in profit or loss was not material.
|
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Employee benefits expenses included in cost of sales, selling, general and administrative, and financial services expenses in the consolidated statements of income for the fiscal years ended March 31, 2021, 2022 and 2023 are as follows: | Offsetting of financial assets and financial liabilities
|
Tables below show the gross amounts of financial assets and liabilities, amounts offset, and net amounts presented in the consolidated statements of financial position, as well as the financial assets and liabilities that are subject to enforceable master netting agreements or similar agreements, as of April 1, 2020, March 31, 2021 and 2022. | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Total employee benefits expenses | | | 1,187,119 | | | | 1,253,148 | | | | 1,539,965 | |
Employee benefits expenses include salaries, bonuses, stock-based compensation, social security, welfare and expenses relating to post-employment benefits. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | | Amounts not offset in the consolidated statements of financial position | | | | | | |
| | |
| | | | | | | | 38,281 | | | | — | | | | 38,281 | | | | 12,614 | | | | 20,545 | | | | 5,122 | | | | | 15,833 | | | | 3,497 | | | | 12,336 | | | | 6,743 | | | | — | | | | 5,593 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 54,114 | | | | 3,497 | | | | 50,617 | | | | 19,357 | | | | 20,545 | | | | 10,715 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 31,896 | | | | — | | | | 31,896 | | | | 7,086 | | | | 23,873 | | | | 937 | | | | | 30,749 | | | | 3,497 | | | | 27,252 | | | | 6,743 | | | | — | | | | 20,509 | | | | | 567,194 | | | | — | | | | 567,194 | | | | 564,874 | | | | — | | | | 2,320 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 629,839 | | | | 3,497 | | | | 626,342 | | | | 578,703 | | | | 23,873 | | | | 23,766 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | | Gross amounts not offset in the consolidated statements of financial position | | | | | | |
| | |
| | | | | | | | 15,159 | | | | — | | | | 15,159 | | | | 10,666 | | | | 2,008 | | | | 2,485 | | | | | 9,944 | | | | 2,704 | | | | 7,240 | | | | — | | | | — | | | | 7,240 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,103 | | | | 2,704 | | | | 22,399 | | | | 10,666 | | | | 2,008 | | | | 9,725 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 38,966 | | | | — | | | | 38,966 | | | | 11,052 | | | | 16,225 | | | | 11,689 | | | | | 27,003 | | | | 2,704 | | | | 24,299 | | | | — | | | | — | | | | 24,299 | | | | | 917,792 | | | | — | | | | 917,792 | | | | 911,881 | | | | — | | | | 5,911 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 983,761 | | | | 2,704 | | | | 981,057 | | | | 922,933 | | | | 16,225 | | | | 41,899 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | | Gross amounts not offset in the
consolidated statements of
| | | | | | |
| | |
| | | | | | | | 37,847 | | | | — | | | | 37,847 | | | | 24,504 | | | | 10,782 | | | | 2,561 | | | | | 30,370 | | | | 26,739 | | | | 3,631 | | | | — | | | | — | | | | 3,631 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 68,217 | | | | 26,739 | | | | 41,478 | | | | 24,504 | | | | 10,782 | | | | 6,192 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 72,004 | | | | — | | | | 72,004 | | | | 33,514 | | | | 29,530 | | | | 8,960 | | | | | 60,056 | | | | 26,739 | | | | 33,317 | | | | — | | | | — | | | | 33,317 | | | | | 1,272,040 | | | | — | | | | 1,272,040 | | | | 1,269,188 | | | | — | | | | 2,852 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,404,100 | | | | 26,739 | | | | 1,377,361 | | | | 1,302,702 | | | | 29,530 | | | | 45,129 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
*1 | Certain subsidiaries have entered into master netting agreements or other similar agreements, which are mainly International Swaps and Derivatives Association (ISDA) Master Agreements. An ISDA Master Agreement is an agreement between two counterparties that may have multiple derivative contracts with each other, and such ISDA Master Agreement may provide for the net settlement of all or a specified group of these derivative contracts, through a single payment, in a single currency, in the event of a default on or affecting any one derivative contract, or a termination event affecting all or a specified group of derivative contracts.Master
nettingagreements create
a right of set off, but the master netting agreements do not automaticallyprovide for such
set off.
|
*2 | Short-term borrowings relate to repurchase agreements.
|
| Defined benefit and severance plans
|
Upon terminating employment, employees of Sony Group CorporationParticipation and its subsidiaries in Japan are entitled, under most circumstances, tolump-sum
indemnities or pension payments as described below. Sony Group Corporation and certain of its subsidiaries’ pension plans utilize a point-based plan under which a point is added every year reflecting the individual employee’s performance over that year. Under the point-based plan, the amount of payment is determined based on the sum of cumulative points from past services and interest points earned on the cumulative points regardless of whether or not the employee is voluntarily retiring.Under the plans, in general, the defined benefits cover 65% of the indemnities under existing regulations to employees. The remaining indemnities are covered by severance payments by the companies. The pension benefits are payable at the option of the retiring employee either in alump-sum
amount or monthly pension payments. Contributions to the plans are funded through several financial institutions in accordance with the applicable laws and regulations.From April 1, 2012, Sony Group Corporation and substantially all of its subsidiaries in Japan have modified existing defined benefit pension plans such that life annuities will no longer accrue additional service benefits, with those participants instead accruing fixed-term annuities. The defined benefit pension plans were closed to new participants and a defined contribution plan was also introduced.
From October 1, 2019, Sony Group Corporation and substantially all of its subsidiaries in Japan have amended their defined benefit pension plans and have implemented defined contribution plans for all employees other than those employees that had retired before the amendments.
In addition, several of Sony’s foreign subsidiaries have defined benefit pension plans or severance indemnity plans, which cover substantially all of their employees. Under such plans, the related cost of benefits is currently funded or accrued. Benefits awarded under these plans are based primarily on the current rate of pay and length of service.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Net defined benefit liability (asset) recognizedresidual liabilities in the consolidated statements of financial positionPictures segment
Amounts recognized in the consolidated statements of financial position
|
The changes in participation and residual liabilities for the fiscal year ended March 31, 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Present value of defined benefit obligations | | | 658,863 | | | | 640,061 | | | | 614,763 | | | | 357,096 | | | | 371,239 | | | | 277,903 | | Fair value of plan assets | | | (437,206 | ) | | | (476,411 | ) | | | (474,933 | ) | | | (277,719 | ) | | | (288,394 | ) | | | (198,791 | ) | The impact of minimum funding requirement and asset ceiling | | | 1,898 | | | | 3,990 | | | | 4,870 | | | | 14,241 | | | | 13,156 | | | | 2,491 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 223,555 | | | | 167,640 | | | | 144,700 | | | | 93,618 | | | | 96,001 | | | | 81,603 | | | | | | | | | | | | | | | | | | | | | | | | | | | Amount recognized in the consolidated statements of financial position | | | | | | | | | | | | | | | | | | | | | | | | | Net defined benefit asset | | | (1,493 | ) | | | (1,757 | ) | | | (21,057 | ) | | | (9,818 | ) | | | (714 | ) | | | (6,544 | ) | Net defined benefit liability | | | 225,048 | | | | 169,397 | | | | 165,757 | | | | 103,436 | | | | 96,715 | | | | 88,147 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 223,555 | | | | 167,640 | | | | 144,700 | | | | 93,618 | | | | 96,001 | | | | 81,603 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Present value of defined benefit obligationsYen in millions
| | | | The changes in the defined benefit obligations for the fiscal yearsFiscal year ended March 31 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | Beginning balance of the fiscal year | | | 658,863 | | | | 640,061 | | | | 357,096 | | | | 371,239 | | | | | | | | | | | | | | | | | | | | | | 12,763 | | | | 12,868 | | | | 2,605 | | | | 2,424 | | | | | — | | | | 4 | | | | 157 | | | | (34 | ) | | | | 3,684 | | | | 3,751 | | | | 6,410 | | | | 5,117 | | | | | | | | | | | | | | | | | | | Change in demographic assumptions | | | 3,091 | | | | (536 | ) | | | (1,568 | ) | | | 630 | | Change in financial assumptions | | | (2,820 | ) | | | (8,594 | ) | | | 10,694 | | | | (16,789 | ) | | | | — | | | | (95 | ) | | | 2,002 | | | | (91 | ) | | | | — | | | | — | | | | 26,669 | | | | 19,372 | | Plan participants’ contributions | | | — | | | | — | | | | 258 | | | | 333 | | | | | (35,563 | ) | | | (32,909 | ) | | | (24,075 | ) | | | (38,923 | ) | | | | — | | | | — | | | | (9,009 | ) | | | (65,375 | ) | | | | 43 | | | | 213 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | Ending balance of the fiscal year | | | 640,061 | | | | 614,763 | | | | 371,239 | | | | 277,903 | | | | | | | | | | | | | | | | | | |
* | Curtailments and settlements of the foreign plans for the fiscal year ended March 31, 2022 relate mainly to the termination of the defined benefit pension plan at certain U.S. subsidiaries.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The weighted average duration of defined benefit obligations for the fiscal years ended March 31, 2021 and 2022 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average duration of defined benefit obligations | | | 11.9 years | | | | 11.5 years | | | | 11.8 years | | | | 15.7 years | |
The significant actuarial assumptions used to determine the present value of defined benefit obligations as of April 1, 2020 and March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 0.6 | % | | | 0.6 | % | | | 0.7 | % | | | 2.1 | % | | | 1.4 | % | | | 2.5 | % |
The sensitivities of the defined benefit obligations to changes in the significant weighted-average actuarial assumptions are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,722 | | | | 19,965 | | | | 18,069 | | | | 10,619 | | | | 11,281 | | | | 11,055 | | | | | (18,277 | ) | | | (16,825 | ) | | | (15,372 | ) | | | (9,914 | ) | | | (10,431 | ) | | | (10,439 | ) |
The sensitivity analyses are calculated using the same method used to determine the defined benefit liability recognized in the consolidated statements of financial position while holding all other assumptions consistent.
Fair value of plan assets
Sony’s pension investment policy recognizes the expected growth and the variability risk associated with the long-term nature of pension liabilities, the returns and risks of diversification across asset classes, and the correlation among assets. The asset allocations are designed to maximize returns consistent with levels of liquidity and investment risk that are considered prudent and reasonable. While the pension investment policy gives appropriate consideration to recent market performance and historical returns, the investment assumptions utilized by Sony are designed to achieve a long-term return consistent with the long-term nature of the corresponding pension liabilities.
The investment objectives of Sony’s plan assets are designed to generate returns that will enable the plans to meet their future obligations. The precise amount for which these obligations will be settled depends on future events, including the retirement dates and life expectancy of the plans’ participants. The obligations are estimated using actuarial assumptions, based on current economic conditions and other pertinent factors. Sony’s investment strategy balances the requirement to generate returns, using potentially higher yielding assets such as equity securities, with the need to control risk in the portfolio with less volatile assets, such as fixed-income securities. Risks include, among others, inflation, volatility in equity values and changes in interest rates that could negatively impact the funding level of the plans, thereby increasing their dependence on contributions from Sony. To mitigate any potential concentration risk of plan assets, thorough consideration is given to balancing the portfolio among industry sectors and geographies, taking into account interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. The target allocations as of March 31, 2022, are, as a result of Sony’s asset liability management, 16% (2020: 17%, 2021: 20%) of equity securities, 52% (2020: 54%, 2021: 51%) of fixed income securities and 32% (2020: 29%, 2021: 29%) of other investments for the pension plans of Sony Group Corporation and most of its subsidiaries in Japan, and, on a weighted average basis, 1% (2020: 14%, 2021: 7%) of equity securities, 22% (2020: 63%, 2021: 32%) of fixed income securities and 77% (2020: 23%, 2021: 61%) of other investments for the pension plans of foreign subsidiaries.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The changes in the plan assets for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | Beginning balance of the fiscal year | | | 437,206 | | | | 476,411 | | | | 277,719 | | | | 288,394 | | | | | | | | | | | | | | | | | | | | | | 2,623 | | | | 3,026 | | | | 5,118 | | | | 3,955 | | | | | | | | | | | | | | | | | | | Return on plan assets excluding interest income | | | 56,913 | | | | 17,617 | | | | (28,024 | ) | | | (10,121 | ) | | | | — | | | | — | | | | 24,158 | | | | 13,880 | | | | | 2,333 | | | | 2,476 | | | | 37,880 | | | | 4,573 | | Plan participants’ contributions | | | — | | | | — | | | | 258 | | | | 333 | | | | | (22,664 | ) | | | (24,597 | ) | | | (22,488 | ) | | | (37,545 | ) | | | | — | | | | — | | | | — | | | | (5,005 | ) | | | | — | | | | — | | | | (6,227 | ) | | | (59,673 | ) | | | | | | | | | | | | | | | | | | Ending balance of the fiscal year | | | 476,411 | | | | 474,933 | | | | 288,394 | | | | 198,791 | | | | | | | | | | | | | | | | | | |
* | Curtailments and settlements of the foreign plans for the fiscal year ended March 31, 2022 relate mainly to the termination of the defined benefit pension plan at certain U.S. subsidiaries.
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Sony makes contributions to its defined benefit pension plans as deemed appropriate by management after considering the fair value of plan assets, expected return on plan assets and the present value of defined benefit obligations. Sony expects to contribute approximately 6 billion yen to the Japanese plans and approximately 4 billion yen to the foreign plans during the fiscal year ending March 31, 2023.
The fair values of the assets held by Japanese and foreign plans are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | Market price in active market | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | 13,349 | | | | 13,349 | | | | — | | | | | 24,715 | | | | 21,377 | | | | 3,338 | | | | | | | | | | | | | | | | | | 7,833 | | | | 1,087 | | | | 6,746 | | | | | 3,952 | | | | 20 | | | | 3,932 | | | | | 303,030 | | | | — | | | | 303,030 | | Private equity | | | 35,866 | | | | — | | | | 35,866 | | Hedge funds | | | 48,461 | | | | — | | | | 48,461 | | | | | | | | | | | | | | | | | | 437,206 | | | | 35,833 | | | | 401,373 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | |
| | | Market price in active market | | | | | | | | | Cash and cash equivalents | | | 44,317 | | | | 44,317 | | | | — | | | | | 32,269 | | | | 28,288 | | | | 3,981 | | | | | | | | | | | | | | | | | | 9,820 | | | | 1,149 | | | | 8,671 | | | | | 3,635 | | | | 19 | | | | 3,616 | | | | | 295,963 | | | | — | | | | 295,963 | | | | | 43,023 | | | | — | | | | 43,023 | | Hedge funds | | | 47,384 | | | | — | | | | 47,384 | | | | | | | | | | | | | | | | | | 476,411 | | | | 73,773 | | | | 402,638 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Market price in active market | | | | | | | | | Cash and cash equivalents | | | 13,843 | | | | 13,843 | | | | — | | | | | 31,660 | | | | 28,175 | | | | 3,485 | | | | | | | | | | | | | | | | | | 10,005 | | | | 1,122 | | | | 8,883 | | | | | 4,222 | | | | 31 | | | | 4,191 | | | | | 316,319 | | | | — | | | | 316,319 | | | | | 49,777 | | | | — | | | | 49,777 | | Hedge funds | | | 49,107 | | | | — | | | | 49,107 | | | | | | | | | | | | | | | | | | 474,933 | | | | 43,171 | | | | 431,762 | | | | | | | | | | | | | | |
| *1 | Represents primarily Japanese equity securities.
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| *2 | Includes approximately82%, 84% and 84% of debt securities issued by Japanese national and local governments, and 18%, 16% and 16% of debt securities issued by foreign national and local governments as of April 1, 2020 and for the fiscal years ended March 31, 2021 and 2022, respectively. |
| *3 | Includes debt securities issued by Japanese and foreign corporation and government related agencies.
|
| *4 | Commingled funds represent pooled institutional investments, including primarily investment trusts.
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| | | | | | | | | | | | | | | | | | | | | | | | | | Market price in active market | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | 3,940 | | | | 3,940 | | | | — | | | | | 17,591 | | | | 16,973 | | | | 618 | | | | | | | | | | | | | | | | | | 93,826 | | | | — | | | | 93,826 | | | | | 32,080 | | | | — | | | | 32,080 | | | | | 1,320 | | | | — | | | | 1,320 | | | | | 16,722 | | | | — | | | | 16,722 | | | | | 78,972 | | | | — | | | | 78,972 | | Real estate and other | | | 33,268 | | | | — | | | | 33,268 | | | | | | | | | | | | | | | | | | 277,719 | | | | 20,913 | | | | 256,806 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | Market price in active market | | | | | | | | | Cash and cash equivalents | | | 2,642 | | | | 2,642 | | | | — | | | | | 11,349 | | | | 10,631 | | | | 718 | | | | | | | | | | | | | | | | | | 18,843 | | | | — | | | | 18,843 | | | | | 59,071 | | | | — | | | | 59,071 | | | | | 120 | | | | — | | | | 120 | | | | | 129,491 | | | | — | | | | 129,491 | | | | | 63,118 | | | | — | | | | 63,118 | | | | | 3,760 | | | | — | | | | 3,760 | | | | | | | | | | | | | | | | | | 288,394 | | | | 13,273 | | | | 275,121 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Market price in active market | | | | | | | | | Cash and cash equivalents | | | 2,350 | | | | 2,350 | | | | — | | | | | 61 | | | | 61 | | | | — | | | | | | | | | | | | | | | | | | 19,141 | | | | — | | | | 19,141 | | | | | 23,546 | | | | — | | | | 23,546 | | | | | 63 | | | | — | | | | 63 | | | | | 129,084 | | | | 432 | | | | 128,652 | | | | | 22,316 | | | | — | | | | 22,316 | | | | | 2,230 | | | | 8 | | | | 2,222 | | | | | | | | | | | | | | | | | | 198,791 | | | | 2,851 | | | | 195,940 | | | | | | | | | | | | | | |
| *1 | Includes primarily foreign equity securities.
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| *2 | Includes primarily foreign government debt securities.
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| *3 | Includes primarily foreign corporate debt securities.
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| *4 | Represents annuity contracts with or without profit sharing and bulk insurance contracts.
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| *5 | Commingled funds represent pooled institutional investments, including primarily investment trusts.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The impact of minimum funding requirement and asset ceiling
The impact of minimum funding requirement and asset ceiling for the fiscal years ended March 31, 2021 and 2022 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | Beginning balance of the fiscal year | | | 1,898 | | | | 3,990 | | | | 14,241 | | | | 13,156 | | | | | | | | | | | | | | | | | | | | | | 11 | | | | 25 | | | | 271 | | | | 187 | | | | | | | | | | | | | | | | | | | Change in asset ceiling excluding interest income | | | 2,081 | | | | 855 | | | | (2,447 | ) | | | (11,018 | ) | | | | — | | | | — | | | | 1,091 | | | | 166 | | | | | | | | | | | | | | | | | | | Ending balance of the fiscal year | | | 3,990 | | | | 4,870 | | | | 13,156 | | | | 2,491 | | | | | | | | | | | | | | | | | | |
| Defined contribution plans
|
Total defined contribution expenses for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | 10,992 | | | | 11,137 | | | | | 9,639 | | | | 11,154 | |
| Employee benefits expenses
|
Employee benefits expenses included in cost of sales, selling, general and administrative, and financial services expenses in the consolidated statements of income for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Total employee benefits expenses | | | 1,187,119 | | | | 1,253,148 | |
Employee benefits expenses include salaries, bonuses, stock-based compensation, social security, welfare and expenses relating to post-employment benefits.
| Participation and residual liabilities in the Pictures segment
|
The changes in participation and residual liabilities for the fiscal year ended March 31, 2022 are as follows:
| | | | | | | | | | | Fiscal year ended March 31
| | | | | | Balance at beginning of the fiscal year | | | 277,970 | | | | | | | | | | 161,433 | | | | | 116,537 | | | | | | | Additional participation and residual liabilities
| | | 254,916 | | Amounts paid during the year
| | | (159,836 | ) | | | | 37,225 | | | | | | | Balance at end of the fiscal year
| | | 410,275 | | | | | | | | | | 190,162 | | | | | 220,113 | |
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | Additional participation and residual liabilities | | | 210,226 | | There were no material changes driven from discounting or unpaidAmounts paid during the year | | | (220,415 | ) | Unpaid amounts reversed during the year.year | | | (13,605 | ) | | Other assets and other liabilities
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Components of other assets as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Advance payments and prepaid expenses | | | 237,643 | | | | 300,237 | | | | 384,299 | | Income taxes receivable and other taxes receivable | | | 186,718 | | | | 118,914 | | | | 169,580 | | | | | 185,408 | | | | 184,548 | | | | 208,241 | | | | | | | | | | | | | | | | | | 609,769 | | | | 603,699 | | | | 762,120 | | | | | | | | | | | | | | | | | | 441,974 | | | | 396,210 | | | | 473,070 | | | | | 167,795 | | | | 207,489 | | | | 289,050 | |
Components of other liabilities as of April 1, 2020, March 31, 2021 and 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 271,286 | | | | 294,911 | | | | 366,227 | | Accrued short-term employee benefits | | | 245,054 | | | | 321,553 | | | | 347,023 | | | | | 168,739 | | | | 186,875 | | | | 197,791 | | | | | 222,028 | | | | 192,396 | | | | 177,404 | | Taxes payable other than income taxes | | | 128,037 | | | | 133,672 | | | | 163,316 | | Future insurance policy benefits and other | | | 127,079 | | | | 134,865 | | | | 153,006 | | | | | 31,807 | | | | 32,851 | | | | 28,606 | | | | | 157,234 | | | | 163,426 | | | | 161,596 | | | | | | | | | | | | | | | | | | 1,351,264 | | | | 1,460,549 | | | | 1,594,969 | | | | | | | | | | | | | | | | | | 1,263,944 | | | | 1,367,527 | | | | 1,488,488 | | | | | 87,320 | | | | 93,022 | | | | 106,481 | |
The changes in product warranties for the fiscal year ended March 31, 2022 are as follows:
| | | | | | | | | | | Fiscal year ended March 31
| | | | | | Balance at beginning of the fiscal year
| | | 32,851 | | | | | | | Additional product warranties
| | | 27,810 | | Amounts used during the year
| | | (23,432 | ) | Unused amounts reversed during the year
| | | (10,659 | ) | | | | 2,036 | | | 36,694 | | | | | | | Balance at end of the fiscal year | | | 423,175 | | | | | | | | | | 230,223 | | | | | 192,952 | |
There was no material changedue to discounting during thefiscal year. | Other assets and other liabilities |
Components of other assets as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | Advance payments and prepaid expenses | | | 384,299 | | | | 481,080 | | Income taxes receivable and other taxes receivable | | | 169,580 | | | | 243,569 | | | | | 208,241 | | | | 207,627 | | | | | | | | | | | | | | 762,120 | | | | 932,276 | | | | | | | | | | | | | | 473,070 | | | | 610,330 | | | | | 289,050 | | | | 321,946 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Components of other liabilities as of March 31, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | 366,227 | | | | 508,454 | | Accrued short-term employee benefits | | | 347,023 | | | | 395,110 | | | | | 197,791 | | | | 197,836 | | Taxes payable other than income taxes | | | 163,316 | | | | 185,224 | | | | | 177,404 | | | | 177,789 | | Future insurance policy benefits and other | | | 153,006 | | | | 162,091 | | Other long-term employee benefit obligations | | | 15,030 | | | | 64,684 | | | | | 28,606 | | | | 26,167 | | | | | 146,566 | | | | 130,573 | | | | | | | | | | | | | | 1,594,969 | | | | 1,847,928 | | | | | | | | | | | | | | 1,488,488 | | | | 1,720,335 | | | | | 106,481 | | | | 127,593 | |
(Changes in presentation) Other long-term employee benefit obligations, which were included within Other as of March 31, 2022, are now reclassified and presented as part of a separate caption due to an increase in materiality. Other long-term employee benefit obligations of 15,030 million yen, which were included within Other as of March 31, 2022 have been reclassified to conform to this change in presentation. The changes in product warranties for the fiscal year ended March 31, 2023 are as follows: | | | | | | | | | | | Fiscal year ended March 31 | | | | | | Balance at beginning of the fiscal year | | | 28,606 | | | | | | |
Additional product warranties | | | 22,963 | | Amounts used during the year | | | (20,442 | ) | Unused amounts reversed during the year | | | (6,359 | ) | | | | 1,399 | | | | | | | Balance at end of the fiscal year | | | 26,167 | | | | | | | | |
The number of shares of common stock authorized as of March 31, 2021, 2022 and 2023 was 3,600,000,000. The following table shows the changes in the number of shares of common stock issued and outstanding during the fiscal years ended March 31, 2021, 2022 and 2023. All of the shares of common stock of Sony Group Corporation are issued with no par value, and the issued stock was fully paid. | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Balance at beginning of the fiscal year | | | 1,261,058,781 | | | | 1,261,058,781 | | | | 1,261,081,781 | | | | | | | | | | | | | | | | | | — | | | | 23,000 | | | | — | | | | | | | | | | | | | | | Balance at end of the fiscal year | | | 1,261,058,781 | | | | 1,261,081,781 | | | | 1,261,081,781 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The number of shares of common stock authorized as of March 31, 2021 and 2022 was 3,600,000,000. All of the shares of common stock of Sony Group Corporation are issued with no par value, and the issued stock was fully paid.
Changes in the number of shares of common stock issued and outstanding during the fiscal years ended March 31, 2021 and 2022 have resulted from the following:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Balance at beginning of the fiscal year | | | 1,261,058,781 | | | | 1,261,058,781 | | | | | | | | | | | | | | — | | | | 23,000 | | | | | | | | | | | Balance at end of the fiscal year | | | 1,261,058,781 | | | | 1,261,081,781 | | | | | | | | | | |
As of April 1, 2020, March 31, 2021 and 2022, the number of shares of treasury stock, which was included in the balance of common stock shares issued above, were 40,898,841 shares, 21,831,206 shares and 24,078,136 shares, respectively.
Sony Group Corporation may purchase its own shares at any time by a resolution of the Board of Directors up to the retained earnings available for dividends to shareholders, in accordance with the Companies Act of Japan.
Although Sony Group Corporation approved on August 4, 2020 by resolution of the Board of Directors the setting of parameters for the repurchase of shares of its own common stock pursuant to the Companies Act of Japan and Sony Group Corporation’s Articles of Incorporation, no common stock was acquired based on these parameters by March 31, 2021.
Sony Group Corporation’s Board of Directors resolved and approved the setting of parameters for the repurchase of shares of its own common stock pursuant to the Companies Act of Japan and Sony Group Corporation’s Articles of Incorporation at the meeting of the Board of Directors held on April 28, 2021. Under the above resolution, Sony Group Corporation repurchased
7,400,600 shares of its common stock for an amount of 88,281 million yen by March 31, 2022.
Additionalpaid-in
capital consists of surplus that is derived from equity transactions and not recorded in common stock, and its primary component is capital reserves. The Companies Act of Japan provides that no less than 50% of thepaid-in
amount or proceeds of issuance of shares shall be incorporated in common stock, and that the remaining shall be incorporated in capital reserves. Capital reserves may be incorporated in common stock upon approval of the General Meeting of Shareholders.Retained earnings consist of legal reserves and accumulated earnings. The Companies Act of Japan provides that earnings in an amount equal to 10% of cash dividends from retained earnings shall be appropriated as a capital reserve or a legal reserve on the date of distribution of retained earnings until an aggregated amount of capital reserve and legal reserve equals 25% of common stock. Legal reserves may be used upon approval of the General Meeting of Shareholders.
Dividends whose record date falls in the fiscal year ended March 31, 2022 and whose effective date falls in the fiscal year ending March 31, 2023 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Board of Directors’ meeting held on May 10, 2022 | | | Common stock | | | | 43,295 | | | | Retained earnings | | | | 35.00 | | | | March 31, 2022 | | | | June 3, 2022 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES As of March 31, 2021, 2022 and 2023, the number of shares of treasury stock, which was included in the balance of common stock shares issued above, were 21,831,206 shares, 24,078,136 shares and 26,584,221 shares, respectively. Sony Group Corporation may purchase its own shares at any time by a resolution of the Board of Directors up to the retained earnings available for dividends to shareholders, in accordance with the Companies Act of Japan. Although Sony Group Corporation approved on August 4, 2020 by resolution of the Board of Directors the setting of parameters for the repurchase of shares of its own common stock pursuant to the Companies Act of Japan and Sony Group Corporation’s Articles of Incorporation, no common stock was acquired based on these parameters. Sony Group Corporation’s Board of Directors resolved and approved the setting of parameters for the repurchase of shares of its own common stock pursuant to the Companies Act of Japan and Sony Group Corporation’s Articles of Incorporation at the meeting of the Board of Directors held on April 28, 2021. Under the above resolution, Sony Group Corporation repurchased 7,400,600 shares of its common stock for an amount of 88,281 million yen during the fiscal year ended March 31, 2022, and repurchased 806,300 shares of its common stock for an amount of 9,100 million yen during the fiscal year ended March 31, 2023. Sony Group Corporation’s Board of Directors resolved and approved the setting of parameters for the repurchase of shares of its own common stock pursuant to the Companies Act of Japan and Sony Group Corporation’s Articles of Incorporation at the meeting of the Board of Directors held on May 10, 2022. Under the above resolution, Sony Group Corporation repurchased 8,545,600 shares of its common stock for an amount of 89,118 million yen during the fiscal year ended March 31, 2023. Additionalpaid-in capital consists of surplus that is derived from equity transactions and not recorded in common stock, and its primary component is capital reserves. The Companies Act of Japan provides that no less than 50% of thepaid-in amount or proceeds of issuance of shares shall be incorporated in common stock, and that the remaining shall be incorporated in capital reserves. Capital reserves may be incorporated in common stock upon approval of the General Meeting of Shareholders. Retained earnings consist of legal reserves and accumulated earnings. The Companies Act of Japan provides that earnings in an amount equal to 10% of cash dividends from retained earnings shall be appropriated as a capital reserve or a legal reserve on the date of distribution of retained earnings until an aggregated amount of capital reserve and legal reserve equals 25% of common stock. Legal reserves may be used upon approval of the General Meeting of Shareholders. Dividends whose record date falls in the fiscal years ended March 31, 2022 and 2023, and whose effective date falls in the subsequent period are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | |
| | |
| | | | | | | | Board of Directors’ meeting held on May 10, 2022 | | | Common stock | | | | 43,295 | | | | Retained earnings | | | | 35.00 | | | | March 31, 2022 | | | | June 3, 2022 | | Board of Directors’ meeting held on April 28, 2023 | | | Common stock | | | | 49,380 | | | | Retained earnings | | | | 40.00 | | | | March 31, 2023 | | | | June 5, 2023 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | Other comprehensive income |
Changes in accumulated other comprehensive income, net of tax, by component for the fiscal years ended March 31, 2021, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Other comprehensive income attributable to Sony Group Corporation’s stockholders | | | Transfer to retained earnings | | | Transactions with noncontrolling interests shareholders and other | | |
| | Changes in equity instruments measured at fair value through other comprehensive income | | | (8,882 | ) | | | 144,544 | | | | 6,085 | | | | (2,125 | ) | | | 139,622 | | Changes in debt instruments measured at fair value through other comprehensive income | | | 985,234 | | | | (179,251 | ) | | | — | | | | 458,754 | | | | 1,264,737 | | | | | 1,248 | | | | 51 | | | | — | | | | — | | | | 1,299 | | Remeasurement of defined benefit pension plans | | | — | | | | 11,555 | | | | (11,555 | ) | | | — | | | | — | | Exchange differences on translating foreign operations | | | — | | | | 113,771 | | | | — | | | | 130 | | | | 113,901 | | Insurance contract valuation adjustments | | | 1,973 | | | | (2,537 | ) | | | — | | | | 476 | | | | (88 | ) | Share of other comprehensive income of investments accounted for using the equity method | | | (97 | ) | | | 885 | | | | (2 | ) | | | — | | | | 786 | | | | | | | | | | | | | | | | | | | | | | | | | | 979,476 | | | | 89,018 | | | | (5,472 | ) | | | 457,235 | | | | 1,520,257 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Other comprehensive income attributable to Sony Group Corporation’s stockholders | | | Transfer to retained earnings | | |
| | Changes in equity instruments measured at fair value through other comprehensive income | | | 139,622 | | | | (106,426 | ) | | | (5,784 | ) | | | 27,412 | | Changes in debt instruments measured at fair value through other comprehensive income | | | 1,264,737 | | | | (416,904 | ) | | | — | | | | 847,833 | | | | | 1,299 | | | | 4,735 | | | | — | | | | 6,034 | | Remeasurement of defined benefit pension plans | | | — | | | | 33,641 | | | | (33,641 | ) | | | — | | Exchange differences on translating foreign operations | | | 113,901 | | | | 223,777 | | | | — | | | | 337,678 | | Insurance contract valuation adjustments | | | (88 | ) | | | 599 | | | | — | | | | 511 | | Share of other comprehensive income of investments accounted for using the equity method | | | 786 | | | | 2,078 | | | | — | | | | 2,864 | | | | | | | | | | | | | | | | | | | | | | 1,520,257 | | | | (258,500 | ) | | | (39,425 | ) | | | 1,222,332 | | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | |
| | | Other comprehensive income attributable to Sony Group Corporation’s stockholders | | | Transfer to retained earnings | | |
| | Changes in equity instruments measured at fair value through other comprehensive income | | | 27,412 | | | | (36,862 | ) | | | 298 | | | | (9,152 | ) | Changes in debt instruments measured at fair value through other comprehensive income | | | 847,833 | | | | (884,678 | ) | | | — | | | | (36,845 | ) | | | | 6,034 | | | | 12,379 | | | | — | | | | 18,413 | | Remeasurement of defined benefit pension plans | | | — | | | | 18,891 | | | | (18,891 | ) | | | — | | Exchange differences on translating foreign operations | | | 337,678 | | | | 175,525 | | | | — | | | | 513,203 | | Insurance contract valuation adjustments | | | 511 | | | | 1,714 | | | | — | | | | 2,225 | | Share of other comprehensive income of investments accounted for using the equity method | | | 2,864 | | | | 3,699 | | | | — | | | | 6,563 | | | | | | | | | | | | | | | | | | | | | | 1,222,332 | | | | (709,332 | ) | | | (18,593 | ) | | | 494,407 | | | | | | | | | | | | | | | | | | |
Each component of other comprehensive income and the related tax effect including noncontrolling interests for the fiscal years ended March 31, 2021, 2022 and 2023 are as follows: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | Comprehensive income components | | | | | | | | | | Items that will not be reclassified to profit or loss | | | | | | | | | | | | | Changes in equity instruments measured at fair value through other comprehensive income | | | | | | | | | | | | | Amount incurred during the year | | | 191,122 | | | | (139,511 | ) | | | (45,708 | ) | | | | | | | | | | | | | | | | | 191,122 | | | | (139,511 | ) | | | (45,708 | ) | | | | (46,382 | ) | | | 33,085 | | | | 8,846 | | | | | | | | | | | | | | | | | | 144,740 | | | | (106,426 | ) | | | (36,862 | ) | Remeasurement of defined benefit pension plans | | | | | | | | | | | | | Amount incurred during the year | | | 17,856 | | | | 43,134 | | | | 27,136 | | | | | | | | | | | | | | | | | | 17,856 | | | | 43,134 | | | | 27,136 | | | | | (6,301 | ) | | | (9,493 | ) | | | (8,245 | ) | | | | | | | | | | | | | | | | | 11,555 | | | | 33,641 | | | | 18,891 | | Share of other comprehensive income of investments accounted for using the equity method | | | | | | | | | | | | | Amount incurred during the year | | | 98 | | | | 869 | | | | 197 | | | | | | | | | | | | | | | | | | 98 | | | | 869 | | | | 197 | | | | | (11 | ) | | | (292 | ) | | | (52 | ) | | | | | | | | | | | | | | | | | 87 | | | | 577 | | | | 145 | | | | | | | | | | | | | | | | | | 156,382 | | | | (72,208 | ) | | | (17,826 | ) |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | Other comprehensive income
|
Changes in accumulated other comprehensive income, net of tax, by component for the fiscal years ended March 31, 2021 and 2022 are as follows:
| | | | | | | | | |
| | Other comprehensive income attributable to Sony Group Corporation’s stockholders | | Transfer to retained earnings | | Transactions with noncontrolling interests shareholders and other | |
| | | Fiscal year ended March 31 | | Changes in equity instruments measured at fair value through other comprehensive income | | | (8,882 | ) | | | 144,544 | | | | 6,085 | | | | (2,125 | ) | | | 139,622 | | | Comprehensive income components | | | | | | | | | Items that may be reclassified subsequently to profit or loss | | | | | | | | Changes in debt instruments measured at fair value through other comprehensive income | | | 985,234 | | | | (179,251 | ) | | | — | | | | 458,754 | | | | 1,264,737 | | | | | | | | Amount incurred during the year | | | | (285,504 | ) | | | (572,692 | ) | | | (1,223,450 | ) | Reclassification to profit or loss | | | | (98 | ) | | | (6,408 | ) | | | (5,300 | ) | | | | | | | | | | | | | | | | (285,602 | ) | | | (579,100 | ) | | | (1,228,750 | ) | | | | | 80,053 | | | | 162,196 | | | | 344,072 | | | | | | | | | | | | | | | | | (205,549 | ) | | | (416,904 | ) | | | (884,678 | ) | | | | 1,248 | | | | 51 | | | | — | | | | — | | | | 1,299 | | | | | | | | Remeasurement of defined benefit pension plans | | | — | | | | 11,555 | | | | (11,555 | ) | | | — | | | | — | | | Amount incurred during the year | | | | 7,481 | | | | (7,703 | ) | | | (12,975 | ) | Reclassification to profit or loss | | | | (7,228 | ) | | | 14,529 | | | | 30,813 | | | | | | | | | | | | | | | | | 253 | | | | 6,826 | | | | 17,838 | | | | | | (202 | ) | | | (2,091 | ) | | | (5,459 | ) | | | | | | | | | | | | | | | | 51 | | | | 4,735 | | | | 12,379 | | Insurance contract valuation adjustments | | | | | | | | Amount incurred during the year | | | | (3,081 | ) | | | 807 | | | | 2,463 | | Reclassification to profit or loss | | | | (39 | ) | | | (10 | ) | | | (83 | ) | | | | | | | | | | | | | | | | (3,120 | ) | | | 797 | | | | 2,380 | | | | | | — | | | | (198 | ) | | | (666 | ) | | | | | | | | | | | | | | | | (3,120 | ) | | | 599 | | | | 1,714 | | Exchange differences on translating foreign operations | | | — | | | | 113,771 | | | | — | | | | 130 | | | | 113,901 | | | | | | | | Insurance contract valuation adjustments | | | 1,973 | | | | (2,537 | ) | | | — | | | | 476 | | | | (88 | ) | | Amount incurred during the year | | | | 115,304 | | | | 227,017 | | | | 177,645 | | Reclassification to profit or loss | | | | 17 | | | | (742 | ) | | | 630 | | | | | | | | | | | | | | | | | 115,321 | | | | 226,275 | | | | 178,275 | | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | 115,321 | | | | 226,275 | | | | 178,275 | | Share of other comprehensive income of investments accounted for using the equity method | | | (97 | ) | | | 885 | | | | (2 | ) | | | — | | | | 786 | | | | | | | | Amount incurred during the year | | | | 798 | | | | 1,501 | | | | 3,554 | | Reclassification to profit or loss | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | 798 | | | | 1,501 | | | | 3,554 | | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | 798 | | | | 1,501 | | | | 3,554 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 979,476 | | | | 89,018 | | | | (5,472 | ) | | | 457,235 | | | | 1,520,257 | | | | (92,499 | ) | | | (183,794 | ) | | | (688,756 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive income | | | | 63,883 | | | | (256,002 | ) | | | (706,582 | ) | | | | | | | | | | | | | | | | | | |
| | Other comprehensive income attributable to Sony Group Corporation’s stockholders | | Transfer to retained earnings | | Transactions with noncontrolling interests shareholders and other | |
| | | Changes in equity instruments measured at fair value through other comprehensive income | | | 139,622 | | | | (106,426 | ) | | | (5,784 | ) | | | — | | | | 27,412 | | | Changes in debt instruments measured at fair value through other comprehensive income | | | 1,264,737 | | | | (416,904 | ) | | | — | | | | — | | | | 847,833 | | | | | | 1,299 | | | | 4,735 | | | | — | | | | — | | | | 6,034 | | | Remeasurement of defined benefit pension plans | | | — | | | | 33,641 | | | | (33,641 | ) | | | — | | | | — | | | Exchange differences on translating foreign operations | | | 113,901 | | | | 223,777 | | | | — | | | | — | | | | 337,678 | | | Insurance contract valuation adjustments | | | (88 | ) | | | 599 | | | | — | | | | — | | | | 511 | | | Share of other comprehensive income of investments accounted for using the equity method | | | 786 | | | | 2,078 | | | | — | | | | — | | | | 2,864 | | | | | | | | | | | | | | | | | | | | | | | 1,520,257 | | | | (258,500 | ) | | | (39,425 | ) | | | — | | | | 1,222,332 | | | | | | | | | | | | | | | | | | | |
| SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Each component of other comprehensive income and the related tax effect includingEquity transactions with noncontrolling interests for the fiscal years ended March 31, 2021 and 2022 are as follows:shareholders
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | Comprehensive income components | | | | | | | Items that will not be reclassified to profit or loss | | | | | | | | | Changes in equity instruments measured at fair value through other comprehensive income | | | | | | | | | Amount incurred during the year | | | 191,122 | | | | (139,511 | ) | | | | | | | | | | | | | 191,122 | | | | (139,511 | ) | | | | (46,382 | ) | | | 33,085 | | | | | | | | | | | | | | 144,740 | | | | (106,426 | ) | Remeasurement of defined benefit pension plans | | | | | | | | | Amount incurred during the year | | | 17,856 | | | | 43,134 | | | | | | | | | | | | | | 17,856 | | | | 43,134 | | | | | (6,301 | ) | | | (9,493 | ) | | | | | | | | | | | | | 11,555 | | | | 33,641 | | Share of other comprehensive income of investments accounted for using the equity method | | | | | | | | | Amount incurred during the year | | | 98 | | | | 869 | | | | | | | | | | | | | | 98 | | | | 869 | | | | | (11 | ) | | | (292 | ) | | | | | | | | | | | | | 87 | | | | 577 | | | | | | | | | | | | | | 156,382 | | | | (72,208 | ) | Items that may be reclassified subsequently to profit or loss | | | | | | | | | Changes in debt instruments measured at fair value through other comprehensive income | | | | | | | | | Amount incurred during the year | | | (285,504 | ) | | | (572,692 | ) | Reclassification to profit or loss | | | (98 | ) | | | (6,408 | ) | | | | | | | | | | | | | (285,602 | ) | | | (579,100 | ) | | | | 80,053 | | | | 162,196 | | | | | | | | | | | | | | (205,549 | ) | | | (416,904 | ) | | | | | | | | | | Amount incurred during the year | | | 7,481 | | | | (7,703 | ) | Reclassification to profit or loss | | | (7,228 | ) | | | 14,529 | | | | | | | | | | | | | | 253 | | | | 6,826 | | | | | (202 | ) | | | (2,091 | ) | | | | | | | | | | | | | 51 | | | | 4,735 | | Insurance contract valuation adjustments | | | | | | | | | Amount incurred during the year | | | (3,081 | ) | | | 807 | | Reclassification to profit or loss | | | (39 | ) | | | (10 | ) | | | | | | | | | | | | | (3,120 | ) | | | 797 | | | | | — | | | | (198 | ) | | | | | | | | | | | | | (3,120 | ) | | | 599 | | Exchange differences on translating foreign operations | | | | | | | | | Amount incurred during the year | | | 115,304 | | | | 227,017 | | Reclassification to profit or loss | | | 17 | | | | (742 | )�� | | | | | | | | | | | | | 115,321 | | | | 226,275 | | | | | — | | | | — | | | | | | | | | | | | | | 115,321 | | | | 226,275 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | Comprehensive income components | | | | | | | Share of other comprehensive income of investments accounted for using the equity method | | | | | | | | | Amount incurred during the year | | | 798 | | | | 1,501 | | Reclassification to profit or loss | | | — | | | | — | | | | | | | | | | | | | | 798 | | | | 1,501 | | | | | — | | | | — | | | | | | | | | | | | | | 798 | | | | 1,501 | | | | | | | | | | | | | | (92,499 | ) | | | (183,794 | ) | | | | | | | | | | Total other comprehensive income | | | 63,883 | | | | (256,002 | ) | | | | | | | | | |
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During the fiscal year ended March 31, 2021, Sony Group Corporation acquired all the common shares and the related stock acquisition rights not held by Sony Group Corporation of SFGI, a consolidated subsidiary of Sony Group Corporation, and SFGI became a wholly-owned subsidiary of Sony Group Corporation. Consideration for this acquisition was 396,698 million yen. The net difference between the consideration, the decrease in the carrying amount of the noncontrolling interests of 1,046,380 million yen and the increase in accumulated other comprehensive income of 457,072 million yen was recognized as an increase to additionalpaid-in capital of 192,610 million yen. | Equity transactions with noncontrolling interests shareholders
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During the fiscal year ended March 31, 2021, Sony Group Corporation acquired all the common shares and the related stock acquisition rights not held by Sony Group Corporation of SFGI, a consolidated subsidiary of Sony Group Corporation, and SFGI became a wholly-owned subsidiary of Sony Group Corporation. Consideration for this acquisition was 396,698 million yen. The net difference between the consideration, the decrease in the carrying amount of the noncontrolling interests of 1,046,380 million yen and the increase in accumulated other comprehensive income of 457,072 million yen was recognized as an increase to additionalpaid-in
capital of 192,610 million yen. On October 1, 2021, SFGI changed its company name from SFH. | Stock-based compensation plans
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The stock-based compensation expense for the fiscal years ended March 31, 2021 and 2022 was 8,892 million yen and 11,105 million yen, respectively.
Sony Group Corporation has a stock-based compensation incentive plan for the corporate executive officers and employees of Sony Group Corporation, and the directors,other
officers and employees of its subsidiaries in the form of a stock option plan. The stock acquisition rights granted under the stock option plan generally have three-year vesting schedules and are exercisable up to 10 years from the date of grant. Sony Group Corporation either issues new shares of common stock or reissues existing treasury stock upon the exercise of these rights.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The weighted-average fair value per share at the date of grant of stock acquisition rights granted during the fiscal years ended March 31, 2021 and 2022 was 2,207 yen and 2,994 yen, respectively. The fair value of stock acquisition rights granted on the date of grant and used to recognize compensation expense for the fiscal years ended March 31, 2021 and 2022 was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
| | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Weighted-average assumptions | | | | | | | Share price at the grant date | | | 9,202 | yen | | | 14,361 | yen | | | | 0.17 | % | | | 0.60 | % | | | | 5.41 | years | | | 5.33 | years | | | | 26.97 | % | | | 22.47 | % | | | | 0.34 | % | | | 0.29 | % |
* | Expected volatility was based on the historical volatilities of Sony Group Corporation’s common stock over the expected life of the stock acquisition rights.
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A summary of the activities regarding the stock option plan during the fiscal years ended March 31, 2021 and 2022 is as follows:
| | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | |
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| | |
| | | | | | | | | | | | | | | Outstanding at beginning of the fiscal year | | | 12,876,700 | | | | 4,982 | | | | 14,022,400 | | | | 6,653 | | | | | | | | | | | | | | | | | | | | | | 4,534,600 | | | | 9,221 | | | | 4,876,400 | | | | 14,188 | | | | | 3,178,300 | | | | 3,911 | | | | 1,944,900 | | | | 5,313 | | | | | 210,600 | | | | 6,280 | | | | 409,600 | | | | 9,484 | | | | | | | | | | | | | | | | | | | Outstanding at end of the fiscal year | | | 14,022,400 | | | | 6,653 | | | | 16,544,300 | | | | 9,397 | | | | | | | | | | | | | | | | | | | Exercisable at end of the fiscal year | | | 5,800,700 | | | | 4,535 | | | | 7,044,700 | | | | 5,883 | |
The weighted-average stock price at the time when the stock acquisition rights were exercised during the fiscal years ended March 31, 2021 and 2022 was 9,311 yen and 12,627 yen, respectively.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
A summary of unexercised stock acquisition rights as of March 31, 2021 and 2022 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at end of the
| | | | | | | | 22 nd | | November 22, 2011 | | | | ¥ | 1,523 | | | | 24,700 | | | | — | | 23 rd | | November 22, 2011 | | | | $ | 19.44 | | | | 77,500 | | | | — | | 24 th | | December 4, 2012 | | | | ¥ | 932 | | | | 24,000 | | | | 14,700 | | 25 th | | December 4, 2012 | | | | $ | 11.23 | | | | 102,600 | | | | 77,900 | | 26 th | | November 20, 2013 | | | | ¥ | 2,007 | | | | 88,500 | | | | 47,000 | | 27 th | | November 20, 2013 | | | | $ | 20.01 | | | | 140,900 | | | | 127,300 | | 28 th | | November 20, 2014 | | | | ¥ | 2,410.5 | | | | 243,700 | | | | 190,900 | | 29 th | | November 20, 2014 | | | | $ | 20.67 | | | | 167,300 | | | | 154,100 | | 30 th | | November 19, 2015 | | | | ¥ | 3,404 | | | | 323,900 | | | | 252,600 | | 31 st | | November 19, 2015 | | | | $ | 27.51 | | | | 218,800 | | | | 170,800 | | 32 nd | | November 22, 2016 | | | | ¥ | 3,364 | | | | 672,100 | | | | 516,300 | | 33 rd | | November 22, 2016 | | | | $ | 31.06 | | | | 446,200 | | | | 367,900 | | 34 th | | November 21, 2017 | | | | ¥ | 5,231 | | | | 872,800 | | | | 572,500 | | 35 th | | November 21, 2017 | | | | $ | 45.73 | | | | 787,200 | | | | 676,400 | | 36 th | | February 28, 2018 | | | | ¥ | 5,442 | | | | 5,800 | | | | 4,500 | | 37 th | | February 28, 2018 | | | | $ | 50.39 | | | | 15,000 | | | | 15,000 | | 38 th | | November 20, 2018 | | | | ¥ | 6,440 | | | | 1,290,600 | | | | 977,800 | | 39 th | | November 20, 2018 | | | | $ | 56.22 | | | | 987,300 | | | | 826,800 | | 40 th | | November 20, 2019 | | | | ¥ | 6,705 | | | | 1,645,300 | | | | 1,389,700 | | 41 st | | November 20, 2019 | | | | $ | 60.99 | | | | 1,393,400 | | | | 1,190,800 | | 42 nd | | April 17, 2020 | | | | $ | 63.75 | | | | 20,000 | | | | 13,300 | | 43 rd | | November 18, 2020 | | | | ¥ | 9,237 | | | | 2,252,000 | | | | 2,193,000 | | 44 th | | November 18, 2020 | | | | $ | 87.48 | | | | 2,222,800 | | | | 1,974,800 | | 45 th | | November 18, 2021 | | | | ¥ | 14,350 | | | | — | | | | 2,399,100 | | 46 th | | November 18, 2021 | | | | $ | 124.90 | | | | — | | | | 2,391,100 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Receivables from contracts with customers, contract assets and contract liabilities are comprised of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Receivables from contracts with customers *1 | | | 1,127,622 | | | | 1,177,027 | | | | 1,382,377 | | | | | 13,985 | | | | 12,204 | | | | 16,785 | | | | | 271,286 | | | | 294,911 | | | | 366,227 | |
| *1 | Receivables from contracts with customers are included in the consolidated statements of financial position as “Trade and other receivables, and contract assets” and “Other financial assets,”non-current.
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| *2 | Contract assets are included in the consolidated statements of financial position as “Trade and other receivables, and contract assets” and “Othernon-current
assets.” |
| *3 | Contract liabilities are included in the consolidated statements of financial position as “Other current liabilities” and “Othernon-current
liabilities.” |
Contract liabilities principally relate to customer advances received prior to performance. Revenues of 216,931 million yen and 231,274 million yen were recognized during the fiscal years ended March 31, 2021 and 2022, which were included in the balance of contract liabilities as of April 1, 2020 and March 31, 2021. Revenues of 76,405 million yen and 78,149 million yen were recognized during the fiscal years ended March 31, 2021 and 2022, respectively, from performance obligations satisfied prior to April 1, 2020 and April 1, 2021, respectively.
Remaining (unsatisfied or partially unsatisfied) performance obligations represent future revenues not yet recorded for firm orders that have not yet been performed. Sony applies practical expedients to exclude contracts with an expected original duration of one year or less. The following table shows the summary of the transaction prices allocated to remaining performance obligations that are unsatisfied as of March 31, 2021 and 2022, respectively, of which more than half are expected to be recognized within one year and substantially all within three years. The amount of the transaction price related to variable consideration is included only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue to be recognized will not occur.
| | | | | | | | | | | | | | | | | | | | | | | | Pictures — Motion Pictures and Television Productions *1 | | | 644,569 | | | | 705,974 | | Pictures — Media Networks | | | 20,346 | | | | 17,568 | | | | | 57,904 | | | | 127,530 | | Others | | | 47,211 | | | | 57,948 | |
| *1 | For Motion Pictures and Television Productions in the Pictures segment, Sony has included all contracts regardless of duration.
|
| *2 | The amount included in the Music segment primarily consists of minimum royalty guarantees or fixed fees in contracts related to license revenue for ongoing access to an evolving library of content.
|
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Contract costs are comprised as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incremental costs of obtaining a contract | | | 7,464 | | | | 8,348 | | | | 7,336 | |
Sony applies practical expedients to recognize the incremental costs of obtaining a contract as an expense if the amortization period of the asset that otherwise would have been recognized is one year or less. The amortization of 7,271 million yen and 6,917 million yen was recognized during the fiscal years ended March 31, 2021 and 2022, respectively. The incremental costs of obtaining a contract are primarily recognized in the EP&S segment for the internet-related service business and amortized to expense over the contract period.
| Disaggregation of revenue
|
For the breakdown of sales and financial services revenue by segments, product categories and geographies, refer to Note 4.
| Supplemental consolidated statements of income information
|
| Other operating (income) expense, net
|
Sony records transactions in other operating (income) expense, net due to either the nature of the transaction or in consideration of factors including the relationship to Sony’s core operations.
Other operating (income) expense, net is comprised of the following:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | — | | | | (70,020 | ) | (Gain) loss on purchase/sale of interests in subsidiaries and associates, net | | | (18,868 | ) | | | (4,593 | ) | (Gain) loss on sale, disposal or impairment of assets, net *2 | | | 32,122 | | | | 8,316 | | | | | 996 | | | | 803 | | | | | | | | | | | | | | 14,250 | | | | (65,494 | ) | | | | | | | | | |
| Research and development expenditures
|
Research and development expenditures recognized as an expense for the fiscal years ended March 31, 2021 and 2022 were 545,357 million yen and 618,368 million yen, respectively.
Advertising costs included in selling, general and administrative expenses for the fiscal years ended March 31, 2021 and 2022 were 261,391 million yen and 347,709 million yen, respectively.
| Shipping and handling costs
|
Shipping and handling costs for finished goods included in selling, general and administrative expenses for the fiscal years ended March 31, 2021 and 2022 were 82,708 million yen and 70,858 million yen, respectively, which included the internal transportation costs of finished goods.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| Financial income and expense
|
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | Financial assets measured at AC | | | 7,610 | | | | 6,996 | | | | | | | | | | | Financial assets measured at FVOCI | | | 1,566 | | | | 2,792 | | Gain on revaluation of equity instruments | | | | | | | | | Financial assets measured at FVPL *1 | | | 61,259 | | | | — | | | | | 13,357 | | | | 9,516 | | | | | | | | | | | | | | 83,792 | | | | 19,304 | | | | | | | | | | |
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | Financial liabilities measured at AC | | | 5,916 | | | | 6,377 | | | | | 8,292 | | | | 8,223 | | Foreign exchange loss, net *2 | | | 16,191 | | | | 1,612 | | Loss on revaluation of equity instruments | | | | | | | | | Financial assets measured at FVPL *1 | | | — | | | | 66,177 | | | | | 10,683 | | | | 21,751 | | | | | | | | | | | | | | 41,082 | | | | 104,140 | | | | | | | | | | |
| *1 | Shares of Spotify Technology S.A. (“Spotify”) held by Sony are classified as equity securities required to be measured at fair value through profit or loss. The revaluation of the Spotify shares owned as of March 31, 2021 and March 31, 2022 resulted inan
unrealized gain, net of costs to be paid to Sony’s artists and distributed labels, of 51,310 million yen (480 million U.S. dollars) andan
unrealized loss, net of a decrease in costs to be paid to Sony’s artists and distributed labels, of 45,017 million yen (395 million U.S. dollars),
respectively. |
| *2 | Foreign exchange loss, net includes gains or losses from foreign exchange contracts.
|
Income (loss) before income taxes and the provision for current and deferred income taxes attributable to such income are as follows:
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | Income (loss) before income taxes: | | | 997,965 | | | | 1,117,503 | | | | | | | | | | | | | | | | | | | | | | | 156,592 | | | | 238,602 | | | | | (202,523 | ) | | | (9,505 | ) | | | | | | | | | | | | | (45,931 | ) | | | 229,097 | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The impact of the changes in tax rates for the fiscal years ended March 31, 2021 and 2022 resulted in deferred tax benefits of 722 million yen and 2,136 million yen, respectively.
The impact of the write-down or reversal of a previous write-downof the
deferred tax assets for the fiscal years ended March 31, 2021 and 2022 resulted in deferred tax benefits of 287,590 million yen and 33,415 million yen, respectively.A reconciliation of the differences between the Japanese statutory tax rate and the effective tax rate is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 31.5 | % | | | 31.5 | % | | | | 0.2 | | | | 0.2 | | | | | (1.4 | ) | | | (1.9 | ) | Change in statutory tax rate | | | (0.1 | ) | | | (0.2 | ) | Change in unrecognized tax assets (other than the reversal of a previous write-down of the deferred tax assets below) | | | (5.5 | ) | | | (3.7 | ) | Reversal of a previous write-down of the deferred tax assets of the consolidated tax filing group in the United States | | | (6.6 | ) | | | — | | Reversal of a previous write-down of the deferred tax assets relating to the national tax of Sony Group Corporation and its national tax filing group in Japan | | | (21.5 | ) | | | — | | Change in deferred tax liabilities on undistributed earnings of foreign subsidiaries and corporate joint ventures | | | 0.7 | | | | 1.0 | | Lower tax rate applied to life and non-life insurance business in Japan | | | (0.5 | ) | | | (0.4 | ) | Foreign income tax differential | | | (4.4 | ) | | | (5.5 | ) | Adjustments to tax reserves | | | (0.4 | ) | | | 0.8 | | Controlled Foreign Company taxation in Japan | | | 3.0 | | | | (1.8 | ) | | | | 0.4 | | | | 0.5 | | | | | | | | | | | Effective income tax rate | | | -4.6 | % | | | 20.5 | % | | | | | | | | | |
Sony recognizes deferred tax assets, which include temporary differences, net operating losses and tax credits, to the extent that it is probable that taxable profit will be available against which the assets can be utilized. The realization of deferred tax assets is dependent upon the generation of future taxable income in the relevant tax jurisdiction.
During the fiscal year ended March 31, 2021, Sony assessed the recoverability of deferred tax assets, and reversed a previous write-downof the
deferred tax assets for general business tax credits and foreign tax credits of the consolidated tax filing group in the United States.Despite the spread ofCOVID-19,
as a result of the acquisition of SFGI in the three months ended September 30, 2020, the taxable income of Sony Group Corporation and its national tax filing group in Japan has increased and is expected to be stable going forward. Based on an assessment of the available evidence, in particular recent profit history and forecasted profitability, in the three months ended September 30, 2020, Sony reversed a previous write-down of a significant portion of the deferred tax assets of the consolidated tax filing group in Japan, primarily for temporary differences and certain net operating losses. As a result, Sony recorded a tax benefit of 214,346 million yen in the three months ended September 30, 2020. On October 1, 2021, SFGI changed its company name from SFH. Remaining deferred tax assets in Japan, primarily foreign tax credits, are continuously not recognized due to restrictions on the use of such assets and their relatively short remaining carryforward periods.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The schedules of deferred tax assets and liabilities by major cause of their occurrence are as follows:21.
| Stock-based compensation plans |
The stock-based compensation expense for the fiscal years ended March 31, 2021, 2022 and 2023 was 8,892 million yen, 11,105 million yen and 15,781 million yen, respectively. Sony Group Corporation principally has a stock-based compensation incentive plan for the corporate executive officers and employees of Sony Group Corporation, and the directors, other officers and employees of its subsidiaries in the form of a stock option plan. The stock acquisition rights granted under the stock option plan generally have three-year vesting schedules and are exercisable up to 10 years from the date of grant. Sony Group Corporation either issues new shares of common stock or reissues existing treasury stock upon the exercise of these rights. The weighted-average fair value per share at the date of grant of stock acquisition rights granted during the fiscal years ended March 31, 2021, 2022 and 2023 was 2,207 yen, 2,994 yen and 3,123 yen, respectively. The fair value of stock acquisition rights granted on the date of grant and used to recognize compensation expense for the fiscal years ended March 31, 2021, 2022 and 2023 was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Weighted-average assumptions | | | | | | | | | | Share price at the grant date | | | 9,202 | yen | | | 14,361 | yen | | | 11,389 | yen | | | | 0.17 | % | | | 0.60 | % | | | 1.88 | % | | | | 5.41 | years | | | 5.33 | years | | | 5.46 | years | | | | 26.97 | % | | | 22.47 | % | | | 26.55 | % | | | | 0.34 | % | | | 0.29 | % | | | 0.47 | % |
* | Expected volatility was based on the historical volatilities of Sony Group Corporation’s common stock over the expected life of the stock acquisition rights. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2021 | | | | | | | Recognized in profit or loss | | | Recognized in other comprehensive income | | | Changes accompanying business combination | | | Recognized directly in equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating loss carryforwards for tax purposes | | | 34,308 | | | | 50,453 | | | | — | | | | — | | | | — | | | | 1,409 | | | | 86,170 | | Defined benefit liabilities | | | 33,601 | | | | 34,373 | | | | (6,301 | ) | | | — | | | | — | | | | 753 | | | | 62,426 | | Amortization including content assets | | | 64,465 | | | | (20,432 | ) | | | — | | | | — | | | | — | | | | 218 | | | | 44,251 | | | | | 99,360 | | | | (9,413 | ) | | | — | | | | — | | | | — | | | | 871 | | | | 90,818 | | Warranty reserves and accrued expenses | | | 51,811 | | | | 76,032 | | | | — | | | | — | | | | — | | | | 1,806 | | | | 129,649 | | | | | 2,929 | | | | 26,549 | | | | — | | | | — | | | | — | | | | 236 | | | | 29,714 | | | | | 15,973 | | | | 23,787 | | | | — | | | | — | | | | — | | | | 471 | | | | 40,231 | | | | | 16,120 | | | | 31,944 | | | | — | | | | — | | | | — | | | | 251 | | | | 48,315 | | | | | 8,505 | | | | (1,391 | ) | | | — | | | | — | | | | — | | | | 51 | | | | 7,165 | | Impairment of investments | | | 1,506 | | | | 5,441 | | | | — | | | | — | | | | — | | | | (147 | ) | | | 6,800 | | | | | 24,420 | | | | (326 | ) | | | — | | | | — | | | | — | | | | 408 | | | | 24,502 | | | | | 95,874 | | | | 53,236 | | | | 2,261 | | | | — | | | | 1,478 | | | | (607 | ) | | | 152,242 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax assets | | | 448,872 | | | | 270,253 | | | | (4,040 | ) | | | — | | | | 1,478 | | | | 5,720 | | | | 722,283 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Insurance acquisition costs | | | (54,312 | ) | | | (14,978 | ) | | | (107,445 | ) | | | — | | | | — | | | | (10 | ) | | | (176,745 | ) | Insurance contract liabilities | | | (77,359 | ) | | | (89 | ) | | | (73,614 | ) | | | — | | | | — | | | | 1 | | | | (151,061 | ) | Non-current other receivables in the Pictures segment | | | (26,214 | ) | | | 17,984 | | | | — | | | | — | | | | — | | | | 336 | | | | (7,894 | ) | | | | (96,978 | ) | | | 13,149 | | | | — | | | | — | | | | — | | | | (899 | ) | | | (84,728 | ) | Equity securities measured at FVOCI | | | (4,916 | ) | | | 2,296 | | | | (46,382 | ) | | | — | | | | — | | | | (2,009 | ) | | | (51,011 | ) | Equity securities measured at FVPL | | | (36,160 | ) | | | (53,736 | ) | | | — | | | | — | | | | — | | | | 2,178 | | | | (87,718 | ) | Debt securities measured at FVOCI | | | (766,567 | ) | | | (459 | ) | | | 261,112 | | | | — | | | | — | | | | — | | | | (505,914 | ) | Intangible assets acquired through stock exchange offerings | | | (23,949 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (23,949 | ) | Intangible assets derived from EMI Music Publishing acquisition | | | (89,909 | ) | | | 1,556 | | | | — | | | | — | | | | — | | | | (5,128 | ) | | | (93,481 | ) | Undistributed earnings of foreign subsidiaries and corporate joint ventures | | | (24,498 | ) | | | (12,740 | ) | | | — | | | | — | | | | — | | | | (1,928 | ) | | | (39,166 | ) | | | | (38,303 | ) | | | (3,044 | ) | | | — | | | | — | | | | — | | | | — | | | | (41,347 | ) | | | | (40,530 | ) | | | (17,669 | ) | | | (11 | ) | | | (224 | ) | | | 357 | | | | (2,110 | ) | | | (60,187 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax liabilities | | | (1,279,695 | ) | | | (67,730 | ) | | | 33,660 | | | | (224 | ) | | | 357 | | | | (9,569 | ) | | | (1,323,201 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
A summary of the activities regarding the stock option plan during the fiscal years ended March 31, 2021, 2022 and 2023 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | |
| | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at beginning of the fiscal year | | | 12,876,700 | | | | 4,982 | | | | 14,022,400 | | | | 6,653 | | | | 16,544,300 | | | | 9,397 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,534,600 | | | | 9,221 | | | | 4,876,400 | | | | 14,188 | | | | 4,744,300 | | | | 10,979 | | | | | 3,178,300 | | | | 3,911 | | | | 1,944,900 | | | | 5,313 | | | | 1,260,800 | | | | 5,565 | | | | | 210,600 | | | | 6,280 | | | | 409,600 | | | | 9,484 | | | | 336,300 | | | | 12,654 | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at end of the fiscal year | | | 14,022,400 | | | | 6,653 | | | | 16,544,300 | | | | 9,397 | | | | 19,691,500 | | | | 10,312 | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at end of the fiscal year | | | 5,800,700 | | | | 4,535 | | | | 7,044,700 | | | | 5,883 | | | | 9,683,000 | | | | 8,033 | |
The weighted-average stock price at the time when the stock acquisition rights were exercised during the fiscal years ended March 31, 2021, 2022 and 2023 was 9,311 yen, 12,627 yen and 11,404 yen, respectively.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
A summary of unexercised stock acquisition rights as of March 31, 2021, 2022 and 2023 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at end of the | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 22 nd | | November 22, 2011 | | November 22, 2012 to November 21, 2021 | | ¥ | 1,523 | | | | 24,700 | | | | — | | | | — | | 23 rd | | November 22, 2011 | | November 22, 2012 to November 21, 2021 | | $ | 19.44 | | | | 77,500 | | | | — | | | | — | | 24 th | | December 4, 2012 | | December 4, 2013 to December 3, 2022 | | ¥ | 932 | | | | 24,000 | | | | 14,700 | | | | — | | 25 th | | December 4, 2012 | | December 4, 2013 to December 3, 2022 | | $ | 11.23 | | | | 102,600 | | | | 77,900 | | | | — | | 26 th | | November 20, 2013 | | November 20, 2014 to November 19, 2023 | | ¥ | 2,007 | | | | 88,500 | | | | 47,000 | | | | 14,400 | | 27 th | | November 20, 2013 | | November 20, 2014 to November 19, 2023 | | $ | 20.01 | | | | 140,900 | | | | 127,300 | | | | 110,700 | | 28 th | | November 20, 2014 | | November 20, 2015 to November 19, 2024 | | ¥ | 2,410.5 | | | | 243,700 | | | | 190,900 | | | | 132,500 | | 29 th | | November 20, 2014 | | November 20, 2015 to November 19, 2024 | | $ | 20.67 | | | | 167,300 | | | | 154,100 | | | | 135,500 | | 30 th | | November 19, 2015 | | November 19, 2016 to November 18, 2025 | | ¥ | 3,404 | | | | 323,900 | | | | 252,600 | | | | 186,900 | | 31 st | | November 19, 2015 | | November 19, 2016 to November 18, 2025 | | $ | 27.51 | | | | 218,800 | | | | 170,800 | | | | 148,200 | | 32 nd | | November 22, 2016 | | November 22, 2017 to November 21, 2026 | | ¥ | 3,364 | | | | 672,100 | | | | 516,300 | | | | 390,400 | | 33 rd | | November 22, 2016 | | November 22, 2017 to November 21, 2026 | | $ | 31.06 | | | | 446,200 | | | | 367,900 | | | | 330,500 | | 34 th | | November 21, 2017 | | November 21, 2018 to November 20, 2027 | | ¥ | 5,231 | | | | 872,800 | | | | 572,500 | | | | 434,200 | | 35 th | | November 21, 2017 | | November 21, 2018 to November 20, 2027 | | $ | 45.73 | | | | 787,200 | | | | 676,400 | | | | 620,500 | | 36 th | | February 28, 2018 | | February 28, 2019 to February 27, 2028 | | ¥ | 5,442 | | | | 5,800 | | | | 4,500 | | | | 3,900 | | 38 th | | November 20, 2018 | | November 20, 2019 to November 19, 2028 | | ¥ | 6,440 | | | | 1,290,600 | | | | 977,800 | | | | 839,900 | | 39 th | | November 20, 2018 | | November 20, 2019 to November 19, 2028 | | $ | 56.22 | | | | 987,300 | | | | 826,800 | | | | 760,500 | | 40 th | | November 20, 2019 | | November 20, 2020 to November 19, 2029 | | ¥ | 6,705 | | | | 1,645,300 | | | | 1,389,700 | | | | 1,210,100 | | 41 st | | November 20, 2019 | | November 20, 2020 to November 19, 2029 | | $ | 60.99 | | | | 1,393,400 | | | | 1,190,800 | | | | 1,076,300 | | 42 nd | | April 17, 2020 | | April 17, 2021 to April 16, 2030 | | $ | 63.75 | | | | 20,000 | | | | 13,300 | | | | 13,300 | | 43 rd | | November 18, 2020 | | November 18, 2021 to November 17, 2030 | | ¥ | 9,237 | | | | 2,252,000 | | | | 2,193,000 | | | | 2,060,400 | | 44 th | | November 18, 2020 | | November 18, 2021 to November 17, 2030 | | $ | 87.48 | | | | 2,222,800 | | | | 1,974,800 | | | | 1,862,100 | | 45 th | | November 18, 2021 | | November 18, 2022 to November 17, 2031 | | ¥ | 14,350 | | | | — | | | | 2,399,100 | | | | 2,367,500 | | 46 th | | November 18, 2021 | | November 18, 2022 to November 17, 2031 | | $ | 124.90 | | | | — | | | | 2,391,100 | | | | 2,277,100 | | 47 th | | November 16, 2022 | | November 16, 2023 to November 15, 2032 | | ¥ | 11,390 | | | | — | | | | — | | | | 2,427,100 | | 48 th | | November 16, 2022 | | November 16, 2023 to November 15, 2032 | | $ | 77.89 | | | | — | | | | — | | | | 2,289,500 | |
* | Other mainly consists of exchange differences on translating foreign operations.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES |
Receivables from contracts with customers, contract assets and contract liabilities are comprised of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | Receivables from contracts with customers *1 | | | 1,177,027 | | | | 1,382,377 | | | | | 12,204 | | | | 16,785 | | | | | 294,911 | | | | 366,227 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Receivables from contracts with customers *1 | | | 1,382,377 | | | | 1,679,106 | | | | | 16,785 | | | | 19,355 | | | | | 366,227 | | | | 508,454 | |
| *1 | Receivables from contracts with customers are included in the consolidated statements of financial position as “Trade and other receivables, and contract assets” and “Other financial assets,”non-current. |
| *2 | Contract assets are included in the consolidated statements of financial position as “Trade and other receivables, and contract assets” and “Othernon-current assets.” |
| *3 | Contract liabilities are included in the consolidated statements of financial position as “Other current liabilities” and “Othernon-current liabilities.” |
Contract liabilities principally relate to customer advances received prior to performance. Revenues of 216,931 million yen, 231,274 million yen and 303,779 million yen were recognized during the fiscal years ended March 31, 2021, 2022 and 2023, which were included in the balance of contract liabilities as ofApril 1, 2020, 2021 and 2022. Revenues of 76,405 million yen, 78,149 million yen and 45,645 million yen were recognized during the fiscal years ended March 31, 2021, 2022 and 2023 respectively, from performance obligations satisfied prior to April 1, 2020, 2021 and 2022 respectively. Remaining (unsatisfied or partially unsatisfied) performance obligations represent future revenues not yet recorded for firm orders that have not yet been performed. Sony applies practical expedients to exclude contracts with an expected original duration of one year or less. The following table shows the summary of the transaction prices allocated to remaining performance obligations that are unsatisfied as of March 31, 2022 and 2023, respectively, of which more than half are expected to be recognized within one year and substantially all within three years. The amount of the transaction price related to variable consideration is included only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue to be recognized will not occur. | | | | | | | | | | | | | | | | | | | | | | | | Pictures — Motion Pictures and Television Productions *1 | | | 705,974 | | | | 796,690 | | Pictures — Media Networks | | | 17,568 | | | | 8,120 | | | | | 127,530 | | | | 140,842 | | | | | 57,948 | | | | 68,708 | |
| *1 | For Motion Pictures and Television Productions in the Pictures segment, Sony has included all contracts regardless of duration. |
| *2 | The amount included in the Music segment primarily consists of minimum royalty guarantees or fixed fees in contracts related to license revenue for ongoing access to an evolving library of content. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2022 | | | | | | | Recognized in profit or loss | | | Recognized in other comprehensive income | | | Changes accompanying business combination | | | Recognized directly in equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating loss carryforwards for tax purposes | | | 86,170 | | | | (16,573 | ) | | | — | | | | — | | | | — | | | | 1,490 | | | | 71,087 | | Defined benefit liabilities | | | 62,426 | | | | 20,721 | | | | (9,493 | ) | | | — | | | | 1,640 | | | | (2,729 | ) | | | 72,565 | | Amortization including content assets | | | 44,251 | | | | (20,323 | ) | | | — | | | | — | | | | — | | | | 2,831 | | | | 26,759 | | | | | 90,818
| | | | | | | | | | | | | | | | | | | | | |
| | | | Warranty reserves and accrued expenses | | | 129,649 | | | | 8,389 | | | | — | | | | 134 | | | | — | | | | 3,172 | | | | 141,344 | | | | | 29,714 | | | | (547 | ) | | | — | | | | — | | | | — | | | | 379 | | | | 29,546 | | | | | 40,231 | | | | 2,539 | | | | — | | | | 161 | | | | — | | | | 258 | | | | 43,189 | | | | | 48,315 | | | | (12,007 | ) | | | — | | | | — | | | | — | | | | 2,576 | | | | 38,884 | | | | | 7,165 | | | | 98 | | | | — | | | | 2 | | | | — | | | | 483 | | | | 7,748 | | Impairment of investments | | | 6,800 | | | | 3,418 | | | | — | | | | — | | | | — | | | | (402 | ) | | | 9,816 | | | | | 24,502 | | | | 3,779 | | | | — | | | | — | | | | — | | | | 2,904 | | | | 31,185 | | | | | 152,242 | | | | (32,131 | ) | | | (538 | ) | | | 13,304 | | | | (125 | ) | | | 7,842 | | | | 140,594 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax assets | | | 722,283 | | | | (37,546 | ) | | | (10,031 | ) | | | 14,845 | | | | 1,515 | | | | 17,751 | | | | 708,817 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Insurance acquisition costs | | | (176,745 | ) | | | (13,182 | ) | | | (1,261 | ) | | | — | | | | — | | | | (286 | ) | | | (191,474 | ) | Insurance contract liabilities | | | (151,061 | ) | | | (10,796 | ) | | | (5,480 | ) | | | — | | | | — | | | | — | | | | (167,337 | ) | Non-current other receivables in the Pictures segment | | | (7,894 | ) | | | 8,009 | | | | — | | | | — | | | | — | | | | (115 | ) | | | — | | | | | | | | | | | | | — | | | | | ) | | | | | | | | | | | | )
| Equity securities measured at FVOCI | | | (51,011 | ) | | | 1,841 | | | | 33,085 | | | | — | | | | — | | | | 116 | | | | (15,969 | ) | Equity securities measured at FVPL | | | | )
| | | | | | | | | | | | | | | | | | | | )
| | | | | Debt securities measured at FVOCI | | | (505,914 | ) | | | 9,822 | | | | 168,937 | | | | — | | | | — | | | | (204 | ) | | | (327,359 | ) | Intangible assets acquired through stock exchange offerings | | | (23,949 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (23,949 | ) | Intangible assets derived from EMI Music Publishing acquisition | | | (93,481 | ) | | | (1,209 | ) | | | — | | | | — | | | | — | | | | (6,904 | ) | | | (101,594 | ) | Undistributed earnings of foreign subsidiaries and corporate joint ventures | | | (39,166 | ) | | | (15,031 | ) | | | — | | | | — | | | | — | | | | (1,834 | ) | | | (56,031 | ) | | | | (41,347 | ) | | | (1,345 | ) | | | — | | | | — | | | | — | | | | — | | | | (42,692 | ) | | | | (60,187 | ) | | | 6,072 | | | | (292 | ) | | | (15,230 | ) | | | 765 | | | | 1,262 | | | | (67,610 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax liabilities | | | (1,323,201 | ) | | | 47,051 | | | | 194,989 | | | | (16,475 | ) | | | 765 | | | | (9,849 | ) | | | (1,106,720 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* Other mainly consists of exchange differences on translating foreign operations.
As of April 1, 2020, March 31, 2021 and 2022, based on the assessment of recoverability of deferred tax assets, Sony continued not to recognize the deferred tax assets at some entities in Japan, Sony Mobile CommunicationsAB
in Sweden, Sony Europe B.V. in the United Kingdom, certain subsidiaries in Brazil, and certain subsidiaries in other tax jurisdictions.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | As of March 31, 2022, the deductible temporary differences for which no deferred tax assets are recognized aggregated to
26,600
million yen on a tax basis
million yen as of April 1, 2020 and
44,032
million yen as of March 31, 2021). The amount of the deductible temporary differences is computed using an average tax rate of approximately 21% (an average of approximately 27% as of April 1, 2020 and approximately 11% as of March 31, 2021).Contract costs
|
As of March 31, 2022, Sony had operating loss carryforwards and the amount for which no deferred tax asset is recognized aggregated to
195,091
million yen on a tax basis
(312,499 million yen217,624 million yen as of March 31, 2021). The operating loss carryforwards consist of the following amounts and expiration periods:
55,197million yen with an expiration period of 1 year to 5 years,
34,207 million yen with an expiration period of 6 years to 10 years,
4,181 million yen with an expiration period of 11 years to 15 years, 505 million yen with an expiration period of over 15 years and 101,001 million yen with no expiration period. The operating loss carryforwards with no expiration date as of April 1, 2020 and March 31, 2021 were
82,106 million yen and 89,420 million yen, respectively. There were no significant changes in the operating loss carryforwards for all expiration periods incurred and expired in each fiscal year. The amount of the operating loss carryforwards is computed using an average tax rate of approximately 14% (an average of approximately 28% as of April 1, 2020 and approximately 13% as of March 31, 2021). As of
March 31, 2022, the amount of tax credit carryforwards for which no deferred tax asset is recognized aggregated
to 19,066 million yen (78,914 million yen as of April 1, 2020 and
15,369 million yenas of March 31, 2021). Except for the amount
with no expiration period, which was 1,803 million yen as of March 31, 2022, the major portion of the tax credit carryforwards expire within 5 years. The amount of tax credit carryforwards with no expiration date as of April 1, 2020 and March 31, 2021 was 694 million yen and 974 million yen, respectively.As of April 1, 2020, March 31, 2021 and 2022, deferred income taxes have not been provided on taxable temporary differences for undistributed earnings of certain foreign subsidiaries and corporate joint ventures amounting to 365,925 million yen and which are not expected to be remitted in the foreseeable future. The tax basis of these undistributed earnings was approximately 5,855 million yen. In addition, deferred income taxes have not been provided on the taxable temporary differences in subsidiaries, including a gain of
61,544million yen on a subsidiary’s sale of stock arising from the issuance of common stock of Sony Music Entertainment (Japan) Inc. in a public offering to third parties in November 1991 and the remeasurement gain on 116,939 million yen for the pre-owned equity interest in EMI Music Publishing acquired in November 2018. Sony does not anticipate any significant tax consequences on the possible future disposition of these investments based on its tax planning strategies.
In addition, the deductible temporary differences arising from the translation adjustments for the foreign operations for which deferred tax assets are not recognized as of March 31, 2021 and March 31, 2022 amounted to 50,110 million yen and 92,252 million yen, respectively. The taxable temporary differences arising from the translation adjustments for the foreign operations for which deferred tax liabilities are not recognized as of March 31, 2021 and March 31, 2022 amounted to 164,011
429,930 million yen, respectively.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| Reconciliation of the differences between basic and diluted EPS
|
Reconciliation of the differences between basic and diluted EPS for the fiscal years ended March 31, 2021 and 2022 isContract costs are comprised as follows: | | | | | | | | | | | | | | | | | | | | | | | | Incremental costs of obtaining a contract | | | 7,336 | | | | 6,110 | |
Sony applies practical expedients to recognize the incremental costs of obtaining a contract as an expense if the amortization period of the asset that otherwise would have been recognized is one year or less. The amortization of 7,271 million yen, 6,917 million yen and 4,686 million yen was recognized during the fiscal years ended March 31, 2021, 2022 and 2023, respectively. The incremental costs of obtaining a contract are primarily recognized in the ET&S segment for the internet-related service business and amortized to expense over the contract period. | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Net income attributable to Sony Group Corporation’s stockholders | | | 1,029,610 | | | | 882,178 | | Adjustment amount to net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation | | | | | | | | | Zero Coupon Convertible Bonds | | | 385 | | | | 163 | | | | | | | | | | | Net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation | | | 1,029,995 | | | | 882,341 | | | | | | | | | | | | | | | | | Weighted-average shares outstanding for basic EPS computation | | | 1,230,480 | | | | 1,239,299 | | Effect of dilutive securities: | | | | | | | | | | | | 4,474 | | | | 5,470 | | Zero Coupon Convertible Bonds | | | 15,392 | | | | 6,491 | | | | | | | | | | | Weighted-average shares for diluted EPS computation | | | 1,250,346 | | | | 1,251,260 | | | | | | | | | | | | | | | | | | | | 836.75 | | | | 711.84 | | | | | | | | | | | | | | 823.77 | | | | 705.16 | | | | | | | | | | |
| Disaggregation of common stock which were excluded from the computation of diluted EPS for the fiscal years ended March 31, 2021 and 2022 were 4,475 thousand shares and 4,790 thousand shares, respectively. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the fiscal years ended March 31, 2021 and 2022 when the exercise price for those shares was in excess of the average market value of Sony Group Corporation’s common stock for the fiscal year. revenue For the breakdown of sales and financial services revenue by segments, product categories andg eographies, refer to Note 4. | Supplemental cash flow information |
| Classification of cash flows in Financial Services segment
|
Sony classifies the cash flows from changes in assets and liabilities associated withthe
insurance business and banking business, such as investments and advances, deposits from customers, policyholders’ account and borrowings/debt, as cash flows from operating activities in the consolidated statements of cash flows. | Classification of cash flows of content assets
|
Sony classifies the cash flows from the additions and disposals of content assets as cash flows from operating activities in the consolidated statements of cash flows because the additions and disposals of content assets are derived from the principal revenue-producing activities of Sony.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| Interest and dividendsincome information
|
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | Financial services revenue | | | 198,310 | | | | 208,170 | | | | | 8,409 | | | | 6,988 | | | | | | | | | | | Financial services revenue | | | 19,299 | | | | 27,075 | | | | | 1,559 | | | | 2,800 | | | | | | | | | | | Financial services expenses | | | 9,659 | | | | 6,607 | | | | | 8,172 | | | | 8,843 | |
| The above are items presented in the consolidated statements of income, which include cash flows for interest and dividends.Other operating (income) expense, net
|
Sony classifies the cash flows from interest and dividends of the above as cash flows from operating activities in the consolidated statements of cash flows.
Sony records transactions in other operating (income) expense, net due to either the nature of the transaction or in consideration of factors including the relationship to Sony’s core operations. Other operating (income) expense, net is comprised of the following: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Gain on transfer of GSN Games shares *1 | | | — | | | | (70,020 | ) | | | — | | (Gain) loss on purchase/sale of interests in subsidiaries and associates, net | | | (18,868 | ) | | | (4,593 | ) | | | (4,318 | ) | (Gain) loss on sale, disposal or impairment of assets, net *2 | | | 32,122 | | | | 8,316 | | | | (417 | ) | | | | 996 | | | | 803 | | | | (7,286 | ) | | | | | | | | | | | | | | | | | 14,250 | | | | (65,494 | ) | | | (12,021 | ) | | | | | | | | | | | | | |
| *1 | Non-cash
investing and financing activities |
There was an increase in ROU assets as a result of entering into lease contracts and the conversion of convertible bonds during the fiscal years ended March 31, 2021 and 2022. Refer to (5) Reconciliation of liabilities arising from financing activities for more details.
In addition, during the fiscal year ended March 31, 2022, a portion of the consideration received as a result of transferring of certain operations of Game Show Network, LLC was in the form of stock. Refer to Note 31 for more details.31.
|
| Research and development expenditures |
Research and development expenditures recognized as an expense for the fiscal years ended March 31, 2021, 2022 and 2023 were 545,357 million yen, 618,368 million yen and 735,698 million yen, respectively. Advertising costs included in selling, general and administrative expenses for the fiscal years ended March 31, 2021, 2022 and 2023 were 261,391 million yen, 347,709 million yen and 391,131 million yen, respectively. | Shipping and handling costs |
Shipping and handling costs for finished goods included in selling, general and administrative expenses for the fiscal years ended March 31, 2021, 2022 and 2023 were 82,708 million yen, 70,858 million yen and 95,208 million yen, respectively, which included the internal transportation costs of finished goods.
| Reconciliation of liabilities arising from financing activities
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES |
| | | | | | | | | | | | | | | | | | | | Balance as of April 1, 2020 | | | 66,631 | | | | 817,919 | | | | | | | | | | | Net cash flows from financing activities | | | (18,334 | ) | | | 147,017 | | Acquisitions through business combinations | | | — | | | | 59 | | | | | | | | | | | Conversion of convertible bonds | | | — | | | | (78,342 | ) | Obtaining assets by entering into lease contracts | | | — | | | | 56,247 | | | | | 106 | | | | 15,514 | | | | | 4,134 | | | | 10,630 | | | | | | | | | | | | | | (14,094 | ) | | | 151,125 | | | | | | | | | | | Balance as of March 31, 2021 | | | 52,537 | | | | 969,044 | | | | | | | | | | | Net cash flows from financing activities | | | 408 | | | | (163,104 | ) | Acquisitions through business combinations | | | — | | | | 8,346 | | | | | | | | | | | Conversion of convertible bonds | | | — | | | | (14,597 | ) | Obtaining assets by entering into lease contracts | | | — | | | | 121,937 | | | | | 1,659 | | | | 35,652 | | | | | 1,487 | | | | (6,045 | ) | | | | | | | | | | | | | 3,554 | | | | (17,811 | ) | | | | | | | | | | Balance as of March 31, 2022 | | | 56,091 | | | | 951,233 | | | | | | | | | | |
| The amount of short-term borrowingsFinancial income and long-term debt associated with the insurance business and banking business operations, which are classified as cash flows from operating activities in the consolidated statements of cash flows, is excluded from the amountabove
.expense |
| | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | | | | | Financial assets measured at AC | | | 7,610 | | | | 6,996 | | | | 22,399 | | | | | | | | | | | | | | | Financial assets measured at FVOCI | | | 1,566 | | | | 2,792 | | | | 3,488 | | Gain on revaluation of equity instruments | | | | | | | | | | | | | Financial assets measured at FVPL | | | 61,259 | | | | — | | | | — | | | | | 13,357 | | | | 9,516 | | | | 5,171 | | | | | | | | | | | | | | | | | | 83,792 | | | | 19,304 | | | | 31,058 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities measured at AC | | | 5,916 | | | | 6,377 | | | | 16,016 | | | | | 8,292 | | | | 8,223 | | | | 10,382 | | Foreign exchange loss, net | | | 16,191 | | | | 1,612 | | | | 14,489 | | Loss on revaluation of equity instruments | | | | | | | | | | | | | Financial assets measured at FVPL | | | — | | | | 66,177 | | | | 4,623 | | | | | 10,683 | | | | 21,751 | | | | 13,441 | | | | | | | | | | | | | | | | | | 41,082 | | | | 104,140 | | | | 58,951 | | | | | | | | | | | | | | |
| *1 |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| Components of cash and cash equivalentsForeign exchange loss, net includes gains or losses from foreign exchange contracts.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,034,265 | | | | 902,036 | | | | 1,824,912 | | Time deposits with original maturities of three months or less | | | 369,428 | | | | 635,848 | | | | 72,270 | | | | | 108,830 | | | | 249,098 | | | | 71,554 | | | | | — | | | | — | | | | 80,900 | | | | | | | | | | | | | | | | | | 1,512,523 | | | | 1,786,982 | | | | 2,049,636 | | | | | | | | | | | | | | |
| * 2 | Cash and demand deposits, time deposits with original maturitiesShares of three months or less and call loansSpotify Technology S.A. (“Spotify”) held by Sony are classified as financial assets required to be measured at amortized cost, whose carrying amounts approximate their fair values mainly due to their short-term nature. Money market funds are short-term and highly liquid investments with insignificant risk of changes in value. Money market funds are classified as financial assetsequity securities required to be measured at fair value through profit or loss and classified within Level 1loss. The revaluation of the fair value hierarchy.
Sony has, from timeSpotify shares, net of costs to time, entered into various arrangements with structured entities.
| Consolidated structured entities
|
Sony consolidates investment funds as structured entities in the Financial Services segment. The investment funds are designed so that voting or similar rights are not the dominant factor in deciding who controls these
entities, but it is determined that Sony has control over these structured entities. Sony has not provided and does not intend to provide any significant financial or other support to any of the consolidated structured entities without contractual obligations to the investment funds. The assets and liabilities of structured entities that are consolidated in the Financial Services segment are limited in their intended use by contractual arrangements. As of April 1, 2020, March 31, 2021 and 2022, the total assets of these structured entities are 542,777 million yen, 616,578 million yen, and 628,297 million yen, respectively.Sony also consolidates several structured entities in the Music and Pictures segment. Sony has not provided and does not intend to provide any significant financial or other support to these structured entities without contractual obligation. The total assets and liabilities for these structured entities were insignificantbe paid to Sony’s financial position.
| Unconsolidated structured entities
|
Certain
receivable sales programs also involve structured entities. These structured entities are all special purpose entities associated with the sponsor banks. Based on a qualitative assessment, Sony does not consolidate these entities as Sony does not have the power to direct the activities, an obligation to absorb losses, or the right to receive the residual returns of these structured entities. Sony’s maximum exposure to losses from these structured entities is considered insignificant.
The subsidiary in the Financial Services segment enters into securitization transactions for certain housing loans, involving unconsolidated structured entities. Sony derecognizes a financial asset when the contractual right to receive the cash flows from the financial asset is transferred, or when Sony retains the contractual right to receive the cash flows from the financial asset, but assumes a contractual obligation to pay the cash flows without reinvestment or material delay to other recipients in an arrangement,artists and substantially all the risks and rewards of ownership of the financial asset are transferred to another entity. Since the above securitization transactions do not meet the requirements for derecognition of financial assets, such transferred assets are not derecognized. Sony recorded
182,417 million yen of transferred assets that do not meet the requirement for derecognition of financial assets included in investments and advances in the Financial Services segmentdistributed labels, owned as of March 31, 2022. The liabilities recorded from these securitization transactions were
183,886 million yen and are included in current portion of long-term debt and long-term debt. The liabilities will be settled when the payment for the transferred assets is executed and until this time, Sony is unable to utilize the transferred assets. The
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
transferee of the transferred assets has recourse only to the transferred asset, and as of2021, March 31, 2022 the fair valueand March 31, 2023 resulted in an unrealized gain of the transferred assets and the associated liabilities are 187,55551,310 million yen and 186,702(480 million U.S. dollars), an unrealized loss of 45,017 million yen (395 million U.S. dollars), and an unrealized loss of 7,787 million yen (58 million U.S. dollars), respectively.
|
In addition to the above, in the Financial Services segment, Sony makes investments in structured entities. Sony’s investments in such structured entities include securitized products, foreign corporate bonds and other investments. The following tables present the carrying amount of the investments of unconsolidated structured entities, the presentation in the consolidated statements of financial position, and the maximum exposure to loss associated with these investments as of April 1, 2020, March 31, 2021 and 2022. Maximum exposure to loss does not reflect Sony’s estimate of the actual losses that could result from adverse changes, nor does it reflect the economic hedges Sony enters into to reduce its exposure. The risks associated with structured entities in which Sony is involved are limited to the amount recorded in the consolidated statements of financial position and the amountof
commitments. | | | | | | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of financial position | | | | | | | Investments and advances in the Financial Services segment | | | Investments and advances in the Financial Services segment (Non-current assets) | | | Other financial assets (Current assets) | | | | | — | | | | 224,232 | | | | — | | | | 224,232 | | Foreign corporate bonds *1 | | | 41,452 | | | | 41,036 | | | | — | | | | 82,488 | | | | | — | | | | 135,743 | | | | 21,000 | | | | 164,955 | | | | | | | | | | | | | | | | | | | | | | 41,452 | | | | 401,011 | | | | 21,000 | | | | 471,675 | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes and the provision for current and deferred income taxes attributable to such income are as follows: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Income (loss) before income taxes: | | | 997,965 | | | | 1,117,503 | | | | 1,180,313 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 156,592 | | | | 238,602 | | | | 302,379 | | | | | (202,523 | ) | | | (9,505 | ) | | | (65,688 | ) | | | | | | | | | | | | | | | | | (45,931 | ) | | | 229,097 | | | | 236,691 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
A reconciliation of the differences between the Japanese statutory tax rate and the effective tax rate is as follows: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | 31.5 | % | | | 31.5 | % | | | 31.5 | % | | | | 0.2 | | | | 0.2 | | | | 0.2 | | | | | (1.4 | ) | | | (1.9 | ) | | | (3.2 | ) | Change in statutory tax rate | | | (0.1 | ) | | | (0.2 | ) | | | (0.1 | ) | Change in unrecognized tax assets (other than the reversal of a previous write-down of the deferred tax assets below) | | | (5.5 | ) | | | (3.7 | ) | | | (1.1 | ) | Reversal of a previous write-down of the deferred tax assets of the consolidated tax filing group in the United States | | | (6.6 | ) | | | — | | | | — | | Reversal of a previous write-down of the deferred tax assets relating to the national tax of Sony Group Corporation and its national tax filing group in Japan | | | (21.5 | ) | | | — | | | | — | | Change in deferred tax liabilities on undistributed earnings of foreign subsidiaries and corporate joint ventures | | | 0.7 | | | | 1.0 | | | | 1.6 | | Lower tax rate applied to life and non-life insurance business in Japan | | | (0.5 | ) | | | (0.4 | ) | | | (0.6 | ) | Foreign income tax differential | | | (4.4 | ) | | | (5.5 | ) | | | (6.4 | ) | Recording or reversal of liabilities for uncertain tax positions | | | (0.4 | ) | | | 0.8 | | | | (0.3 | ) | Controlled Foreign Company taxation in Japan | | | 3.0 | | | | (1.8 | ) | | | (2.1 | ) | | | | 0.4 | | | | 0.5 | | | | 0.6 | | | | | | | | | | | | | | | Effective income tax rate | | | -4.6 | % | | | 20.5 | % | | | 20.1 | % | | | | | | | | | | | | | |
Sony recognizes deferred tax assets, which include temporary differences, net operating losses and tax credits, to the extent that it is probable that taxable profit will be available against which the assets can be utilized. The realization of deferred tax assets is dependent upon the generation of future taxable income in the relevant tax jurisdiction. During the fiscal year ended March 31, 2021, Sony assessed the recoverabilityof deferred tax assets, and reversed a previous write-down of the deferred tax assets for general business tax credits and foreign tax credits of the consolidated tax filing group in the United States. The impact of such reversal of a previous write-down of the deferred tax assets resulted in deferred tax benefits. Despite the spread ofCOVID-19, as a result of the acquisition of SFGI in the three months ended September 30, 2020, the taxable income of Sony Group Corporation and its national tax filing group in Japan has increased and is expected to be stable going forward. Based on an assessment of the available evidence, in particular recent profit history and forecasted profitability, in the three months ended September 30, 2020, Sony reversed a previous write-down of a significant portion of the deferred tax assets of the consolidated tax filing group in Japan, primarily for temporary differences and certain net operating losses. As a result, Sony recorded a tax benefit of 214,346 million yen in the three months ended September 30, 2020. Remaining deferred tax assets in Japan, primarily foreign tax credits, are continuously not recognized due to restrictions on the use of such assets and their relatively short remaining carryforward periods.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The schedules of deferred tax assets and liabilities by major cause of their occurrence are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2022 | | | | | | | Recognized in profit or loss | | | Recognized in other comprehensive income | | | Changes accompanying business combination | | | Recognized directly in equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating loss carryforwards for tax purposes | | | 86,170 | | | | (16,573 | ) | | | — | | | | — | | | | — | | | | 1,490 | | | | 71,087 | | Defined benefit liabilities | | | 62,426 | | | | 20,721 | | | | (9,493 | ) | | | — | | | | 1,640 | | | | (2,729 | ) | | | 72,565 | | Amortization including content assets | | | 44,251 | | | | (20,323 | ) | | | — | | | | — | | | | — | | | | 2,831 | | | | 26,759 | | | | | 90,818 | | | | 5,091 | | | | — | | | | 1,244 | | | | — | | | | (1,053 | ) | | | 96,100 | | Warranty reserves and accrued expenses | | | 129,649 | | | | 8,389 | | | | — | | | | 134 | | | | — | | | | 3,172 | | | | 141,344 | | | | | 29,714 | | | | (547 | ) | | | — | | | | — | | | | — | | | | 379 | | | | 29,546 | | | | | 40,231 | | | | 2,539 | | | | — | | | | 161 | | | | — | | | | 258 | | | | 43,189 | | | | | 48,315 | | | | (12,007 | ) | | | — | | | | — | | | | — | | | | 2,576 | | | | 38,884 | | | | | 7,165 | | | | 98 | | | | — | | | | 2 | | | | — | | | | 483 | | | | 7,748 | | Impairment of investments | | | 6,800 | | | | 3,418 | | | | — | | | | — | | | | — | | | | (402 | ) | | | 9,816 | | | | | 24,502 | | | | 3,779 | | | | — | | | | — | | | | — | | | | 2,904 | | | | 31,185 | | | | | 152,242 | | | | (32,131 | ) | | | (538 | ) | | | 13,304 | | | | (125 | ) | | | 7,842 | | | | 140,594 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax assets | | | 722,283 | | | | (37,546 | ) | | | (10,031 | ) | | | 14,845 | | | | 1,515 | | | | 17,751 | | | | 708,817 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Insurance acquisition costs | | | (176,745 | ) | | | (13,182 | ) | | | (1,261 | ) | | | — | | | | — | | | | (286 | ) | | | (191,474 | ) | Insurance contract liabilities | | | (151,061 | ) | | | (10,796 | ) | | | (5,480 | ) | | | — | | | | — | | | | — | | | | (167,337 | ) | Non-current other receivables in the Pictures segment | | | (7,894 | ) | | | 8,009 | | | | — | | | | — | | | | — | | | | (115 | ) | | | — | | | | | (84,728 | ) | | | 25,955 | | | | — | | | | (1,245 | ) | | | — | | | | 452 | | | | (59,566 | ) | Equity securities measured at FVOCI | | | (51,011 | ) | | | 1,841 | | | | 33,085 | | | | — | | | | — | | | | 116 | | | | (15,969 | ) | Equity securities measured at FVPL | | | (87,718 | ) | | | 36,915 | | | | — | | | | — | | | | — | | | | (2,336 | ) | | | (53,139 | ) | Debt securities measured at FVOCI | | | (505,914 | ) | | | 9,822 | | | | 168,937 | | | | — | | | | — | | | | (204 | ) | | | (327,359 | ) | Intangible assets acquired through stock exchange offerings | | | (23,949 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (23,949 | ) | Intangible assets derived from EMI Music Publishing acquisition | | | (93,481 | ) | | | (1,209 | ) | | | — | | | | — | | | | — | | | | (6,904 | ) | | | (101,594 | ) | Undistributed earnings of foreign subsidiaries and corporate joint ventures | | | (39,166 | ) | | | (15,031 | ) | | | — | | | | — | | | | — | | | | (1,834 | ) | | | (56,031 | ) | | | | (41,347 | ) | | | (1,345 | ) | | | — | | | | — | | | | — | | | | — | | | | (42,692 | ) | | | | (60,187 | ) | | | 6,072 | | | | (292 | ) | | | (15,230 | ) | | | 765 | | | | 1,262 | | | | (67,610 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax liabilities | | | (1,323,201 | ) | | | 47,051 | | | | 194,989 | | | | (16,475 | ) | | | 765 | | | | (9,849 | ) | | | (1,106,720 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of financial position | | | | | | | Investments and advances in the Financial Services segment | | | Investments and advances in the Financial Services segment | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 270,920 | | | | — | | | | 270,920 | | Foreign corporate bonds *1 | | | 49,011 | | | | 31,026 | | | | — | | | | 80,037 | | | | | — | | | | 224,765 | | | | 21,000 | | | | 266,825 | | | | | | | | | | | | | | | | | | | | | | 49,011 | | | | 526,711 | | | | 21,000 | | | | 617,782 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of financial position | | | | | | | Investments and advances in the Financial Services segment
| | | Investments and advances in the Financial Services segment
| | |
| | | | | | | | — | | | | 356,862 | | | | — | | | | 356,862 | | Foreign corporate bonds *1 | | | 28,412 | | | | 168,167 | | | | — | | | | 196,579 | | | | | 2 | | | | 247,394 | | | | 24,697 | | | | 286,662 | | | | | | | | | | | | | | | | | | | | | | 28,414 | | | | 772,423 | | | | 24,697 | | | | 840,103 | | | | | | | | | | | | | | | | | | |
* | *1 | Foreign corporate bonds include repackaged bonds.Other mainly consists of exchange differences on translating foreign operations.
|
*2 | Other investments include investment funds.
|
SONY GROUP CORPORATION AND CONSOL IDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2023 | | | | | | | Recognized in profit or loss | | | Recognized in other comprehensive income | | | Changes accompanying business combination | | | Recognized directly in equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating loss carryforwards for tax purposes | | | 71,087 | | | | (5,756 | ) | | | — | | | | 10,157 | | | | — | | | | 5,600 | | | | 81,088 | | Defined benefit liabilities | | | 72,565 | | | | 5,826 | | | | (8,245 | ) | | | (28 | ) | | | (1,881 | ) | | | (1,102 | ) | | | 67,135 | | Amortization including content assets | | | 26,759 | | | | (1,675 | ) | | | — | | | | (25,695 | )
| | | — | | | | 2,828 | | | | 2,217 | | | | | 96,100 | | | | 12,628 | | | | — | | | | 221 | | | | — | | | | 4,378 | | | | 113,327 | | Warranty reserves and accrued expenses | | | 141,344 | | | | 4,240 | | | | — | | | | 1,599 | | | | — | | | | 2,644 | | | | 149,827 | | | | | 29,546 | | | | 15,479 | | | | — | | | | — | | | | — | | | | (302 | ) | | | 44,723 | | | | | 43,189 | | | | (3,566 | ) | | | — | | | | — | | | | — | | | | 429 | | | | 40,052 | | Debt securities measured at FVOCI | | | — | | | | — | | | | 28,658 | | | | — | | | | — | | | | — | | | | 28,658 | | | | | 38,884 | | | | (12,297 | ) | | | — | | | | 5,792 | | | | — | | | | 3,845 | | | | 36,224 | | | | | 7,748 | | | | (1,857 | ) | | | — | | | | — | | | | — | | | | 259 | | | | 6,150 | | Impairment of investments | | | 9,816 | | | | (3,709 | ) | | | — | | | | — | | | | — | | | | (55 | ) | | | 6,052 | | | | | 31,185 | | | | 22,076 | | | | — | | | | (2,299 | ) | | | — | | | | 2,478 | | | | 53,440 | | | | | 140,594 | | | | 45,871 | | | | (2,408 | ) | | | 21,427 | | | | (985 | ) | | | 6,099 | | | | 210,598 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax assets | | | 708,817 | | | | 77,260 | | | | 18,005 | | | | 11,174 | | | | (2,866 | ) | | | 27,101 | | | | 839,491 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Insurance acquisition costs | | | (191,474 | ) | | | (8,914 | ) | | | (5,769 | ) | | | — | | | | — | | | | (487 | ) | | | (206,644 | ) | Insurance contract liabilities | | | (167,337 | ) | | | (12,317 | ) | | | (1,398 | ) | | | — | | | | — | | | | 7,220 | | | | (173,832 | ) | Non-current other receivables in the Pictures segment | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | (59,566 | ) | | | (24,365 | ) | | | — | | | | (208 | ) | | | — | | | | (6,328 | ) | | | (90,467 | ) | Equity securities measured at FVOCI | | | (15,969 | ) | | | 923 | | | | 8,846 | | | | — | | | | — | | | | 1,823 | | | | (4,377 | ) | Equity securities measured at FVPL | | | (53,139 | ) | | | 31,952 | | | | — | | | | — | | | | — | | | | (3,380 | ) | | | (24,567 | ) | Debt securities measured at FVOCI | | | (327,359 | ) | | | 5,024 | | | | 322,581 | | | | — | | | | — | | | | (246 | ) | | | — | | Intangible assets acquired through stock exchange offerings | | | (23,949 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (23,949 | ) | Intangible assets derived from EMI Music Publishing acquisition | | | (101,594 | ) | | | 2,277 | | | | — | | | | — | | | | — | | | | (6,639 | ) | | | (105,956 | ) | Undistributed earnings of foreign subsidiaries and corporate joint ventures | | | (56,031 | ) | | | (15,318 | ) | | | — | | | | — | | | | — | | | | 1,759 | | | | (69,590 | ) | | | | (42,692 | ) | | | (4,646 | ) | | | — | | | | — | | | | — | | | | — | | | | (47,338 | ) | | | | (67,610 | ) | | | 13,812 | | | | (52 | ) | | | (3,120 | ) | | | (159 | ) | | | (7,127 | ) | | | (64,256 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax liabilities | | | (1,106,720 | ) | | | (11,572 | ) | | | 324,208 | | | | (3,328 | ) | | | (159 | ) | | | (13,405 | ) | | | (810,976 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* | Other mainly consists of exchange differences ontra nslatin g foreig n operations. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES As of March 31, 2022 and 2023, based on the assessment of recoverability of deferred tax assets, Sony continued not to recognize the deferred tax assets at some entities in Japan, Sony Mobile Communications AB in Sweden, Sony Europe B.V. in the United Kingdom, certain subsidiaries in Brazil, and certain subsidiaries in other tax jurisdictions. As of March 31, 2022 and 2023, the deductible temporary differences, operating loss carryforwards and tax credit carryforwards for which no deferred tax asset is recognized are as follows: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Deductible temporary differences | | | 154,581 | | | | 126,406 | | Operating loss carryforwards | | | 1,437,551 | | | | 1,384,658 | | Tax credit carryforwards | | | 19,066 | | | | 18,853 | |
As of March 31, 2022 and 2023, the expected expiration period of the operating loss carryforwards for which no deferred tax asset is recognized are as follows: | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Within 5 years | | | 599,333 | | | | 602,799 | | Over 5 years to 10 years | | | 277,418 | | | | 250,587 | | Over 10 years to 15 years | | | 23,974 | | | | 25,786 | | Over 15 years | | | 2,930 | | | | 13,245 | | No expiration period | | | 533,896 | | | | 492,241 | | | | | | | | | | | Total | | | 1,437,551 | | | | 1,384,658 | | | | | | | | | | |
As of March 31, 2022 and 2023, the expected expiration period of the tax credit carryforwards for which no deferred tax asset is recognized is mostly within 5 years except for the amount with no expiration period. The amount of tax credit carryforwards with no expiration date as of March 31, 2022 and March 31, 2023 was 1,803 million yen and 1,047 million yen, respectively. Deferred income taxes have not been provided on taxable temporary differences for undistributed earnings of certain foreign subsidiaries and corporate joint ventures which are not expected to be remitted in the foreseeable future. As of March 31, 2022 and March 31, 2023, such taxable temporary differences amounted to 365,925 million yen and 560,888 million yen, respectively. The tax basis of these undistributed earnings was approximately 5,855 million yen and 8,974 million yen, respectively. In addition, deferred income taxes have not been provided on the taxable temporary differences in subsidiaries, including a gain of 61,544 million yen on a subsidiary’s sale of stock arising from the issuance of common stock of Sony Music Entertainment (Japan) Inc. in a public offering to third parties in November 1991 and the remeasurement gain on 116,939 million yen for thepre-owned equity interest in EMI Music Publishing acquired in November 2018. Sony does not anticipate any significant tax consequences on the possible future disposition of these investments based on its tax planning strategies. In addition, the deductible temporary differences arising from the translation adjustments for the foreign operations for which deferred tax assets are not recognized as of March 31, 2022 and March 31, 2023 amounted to 92,252 million yen and 181,037 million yen, respectively. The taxable temporary differences arising from the translation adjustments for the foreign operations for which deferred tax liabilities are not recognized as of March 31, 2022 and March 31, 2023 amounted to 429,930 million yen and 694,240 milliony en, respectively.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES 29.26. Reconciliation of the differences between basic and diluted EPS Reconciliation of the differences between basic and diluted EPS for the fiscal years ended March 31, 2021, 2022 and 2023 is as follows: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Net income attributable to Sony Group Corporation’s stockholders | | | 1,029,610 | | | | 882,178 | | | | 937,126 | | Adjustment amount to net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation: | | | | | | | | | | | | | Zero coupon convertible bonds | | | 385 | | | | 163 | | | | 51 | | | | | | | | | | | | | | | Net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation | | | 1,029,995 | | | | 882,341 | | | | 937,177 | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Weighted-average shares outstanding for basic EPS computation | | | 1,230,480 | | | | 1,239,299 | | | | 1,235,701 | | Effect of dilutive securities: | | | | | | | | | | | | | Stock acquisition rights and other | | | 4,474 | | | | 5,470 | | | | 3,646 | | Zero coupon convertible bonds | | | 15,392 | | | | 6,491 | | | | 2,030 | | | | | | | | | | | | | | | Weighted-average shares for diluted EPS computation | | | 1,250,346 | | | | 1,251,260 | | | | 1,241,377 | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | 836.75 | | | | 711.84 | | | | 758.38 | | | | | | | | | | | | | | | | | | 823.77 | | | | 705.16 | | | | 754.95 | | | | | | | | | | | | | | |
Potential shares of common stock which were excluded from the computation of diluted EPS for the fiscal years ended March 31, 2021, 2022 and 2023 were 4,475 thousand shares, 4,790 thousand shares and 11,223 thousand shares, respectively,which primarily consisted of stock options. | Subsidiaries | Supplemental cash flow information |
| Classification of cash flows in Financial Services segment |
Sony classifies the cash flows from changes in assets and liabilities associated with the insurance business and banking business, such as investments and advances, deposits from customers, policyholders’ account and borrowings/debt, as cash flows from operating activities in the consolidated statements of cash flows. | Classification of cash flows of content assets |
Sony classifies the cash flows from the additions and disposals of content assets as cash flows from operating activities in the consolidated statements of cash flows because the additions and disposals of content assets are derived from the principal revenue-producing activities of Sony.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | | | | | | | | | | | | | | Financial services revenue | | | 198,310 | | | | 208,170 | | | | 224,137 | | | | | 8,409 | | | | 6,988 | | | | 20,872 | | | | | | | | | | | | | | | Financial services revenue | | | 19,299 | | | | 27,075 | | | | 23,409 | | | | | 1,559 | | | | 2,800 | | | | 3,488 | | | | | | | | | | | | | | | Financial services expenses | | | 9,659 | | | | 6,607 | | | | 27,352 | | | | | 8,172 | | | | 8,843 | | | | 11,663 | |
| Major consolidated subsidiaries
|
The following table sets forth the major consolidated subsidiaries owned, directly or indirectly, by Sony Group Corporation.
| | | | | | | | | | | | | | | Sony Interactive Entertainment Inc. | | Japan | | 100.0 | Sony Music Entertainment (Japan) Inc. | | Japan | | 100.0 | Sony Corporation | | Japan | | 100.0 | Sony Global Manufacturing & Operations Corporation | | Japan | | 100.0 | Sony Semiconductor Solutions Corporation | | Japan | | 100.0 | Sony Semiconductor Manufacturing Corporation | | Japan | | 100.0 | Sony Network Communications Inc. | | Japan | | 100.0 | Sony Marketing Inc. | | Japan | | 100.0 | Sony Storage Media Solutions Corporation | | Japan | | 100.0 | Sony Financial Group Inc. | | Japan | | 100.0 | Sony Life Insurance Co., Ltd. | | Japan | | 100.0 | Sony Bank Inc. | | Japan | | 100.0 | Sony Assurance Inc. | | Japan | | 100.0 | Sony Corporation of America | | U.S.A. | | 100.0 | Sony Interactive Entertainment LLC | | U.S.A. | | 100.0 | Sony Music Entertainment | | U.S.A. | | 100.0 | Sony Music Publishing LLC | | U.S.A. | | 100.0 | Sony Pictures Entertainment Inc. | | U.S.A. | | 100.0 | Sony Electronics Inc. | | U.S.A. | | 100.0 | Sony Europe B.V. | | U.K. | | 100.0 | Sony Interactive Entertainment Europe Ltd. | | U.K. | | 100.0 | Sony Global Treasury Services Plc | | U.K. | | 100.0 | Sony Overseas Holding B.V. | | Netherlands | | 100.0 | Sony (China) Limited | | China | | 100.0 | Sony EMCS (Malaysia) Sdn. Bhd. | | Malaysia | | 100.0 | Sony Electronics (Singapore) Pte. Ltd. | | Singapore | | 100.0 |
The above are items presented in the consolidated statements of income, which include cash flows for interest and dividends. | Subsidiaries with material noncontrolling interests
|
SFGI had noncontrolling interests that were material to Sony as of April 1, 2020. Sony acquired all of the common shares and the related stock acquisition rights of SFGI and increased its ownership from 65.1% to 100% in the fiscal year ended March 31, 2021. Accordingly, the summarized financial information relating to SFGI is shown only for April 1, 2020. The summarized financial information shows amounts before elimination of intercompany transactions. On October 1, 2021, SFGI changed its company name from SFH.Sony classifies the cash flows from interest and dividends of the above as cash flows from operating activities in the consolidated statements of cash flows. | Non-cash investing and financing activities |
There was an increase in ROU assets as a result of entering into lease contracts and the conversion of convertible bonds during the fiscal years ended March 31, 2021, 2022 and 2023. Refer to (5) Reconciliation of liabilities arising from financing activities for more details. In addition, during the fiscal year ended March 31, 2022, a portion of the consideration received as a result of the transfer of certain operations of Game Show Network, LLC was in the form of stock. Refer to Note 31 for more details.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | Sony Financial Group Inc. and its consolidated subsidiaries
| | | | | | | | | | | | | Shareholding ratio of noncontrolling interests
| | | 34.9 | % | Cumulative amount of noncontrolling interests
| | | 1,074,469 | | | | | | | | | | | | | | | 1,124,209 | | | | | 16,809,378 | | | | | 3,406,291 | | | | | 11,470,701 | |
| AcquisitionsReconciliation of liabilities arising from financing activities
|
(1) | | | | | | | | | | | | | | | | | | | | Balance as of April 1, 2020 | | | 66,631 | | | | 817,919 | | | | | | | | | | | Net cash flows from financing activities | | | (18,334 | ) | | | 147,017 | | Acquisitions through business combinations | | | — | | | | 59 | | | | | | | | | | | Conversion of convertible bonds | | | — | | | | (78,342 | ) | Obtaining assets by entering into lease contracts | | | — | | | | 56,247 | | | | | 106 | | | | 15,514 | | | | | 4,134 | | | | 10,630 | | | | | | | | | | | | | | (14,094 | ) | | | 151,125 | | | | | | | | | | | Balance as of March 31, 2021 | | | 52,537 | | | | 969,044 | | | | | | | | | | | Net cash flows from financing activities | | | 408 | | | | (163,104 | ) | Acquisitions through business combinations | | | — | | | | 8,346 | | | | | | | | | | | Conversion of convertible bonds | | | — | | | | (14,597 | ) | Obtaining assets by entering into lease contracts | | | — | | | | 121,937 | | | | | 1,659 | | | | 35,652 | | | | | 1,487 | | | | (6,045 | ) | | | | | | | | | | | | | 3,554 | | | | (17,811 | ) | | | | | | | | | | Balance as of March 31, 2022 | | | 56,091 | | | | 951,233 | | | | | | | | | | | Net cash flows from financing activities | | | 32,391 | | | | 229,578 | | Acquisitions through business combinations | | | — | | | | 32,009 | | | | | | | | | | | Conversion of convertible bonds | | | — | | | | (26,563 | ) | Obtaining assets by entering into lease contracts | | | — | | | | 127,322 | | | | | 4,533 | | | | 22,684 | | | | | (369 | ) | | | (13,936 | ) | | | | | | | | | | | | | 36,555 | | | | 371,094 | | | | | | | | | | | Balance as of March 31, 2023 | | | 92,646 | | | | 1,322,327 | | | | | | | | | | |
The amount of short-term borrowings and long-term debt associated with the insurance business and banking business operations, which are classified as cash flows from operating activities in the consolidated statements of cash flows, is excluded from the amount above. | Ellation Holdings, Inc. acquisition | Components of cash and cash equivalents |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 902,036 | | | | 1,824,912 | | | | 1,227,541 | | Time deposits with original maturities of three months or less | | | 635,848 | | | | 72,270 | | | | 76,452 | | | | | 249,098 | | | | 71,554 | | | | 116,607 | | | | | — | | | | 80,900 | | | | 60,300 | | | | | | | | | | | | | | | | | | 1,786,982 | | | | 2,049,636 | | | | 1,480,900 | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Cash and demand deposits, time deposits with original maturities of three months or less and call loans are classified as financial assets required to be measured at amortized cost, whose carrying amounts approximate their fair values mainly due to their short-term nature. Money market funds are short-term and highly liquid investments with insignificant risk of changes in value. Money market funds are classified as financial assets required to be measured at fair value through profit or loss and classified within Level 1 of the fair value hierarchy. Sony has, from time to time, entered into various arrangements with structured entities. | Consolidated structured entities |
Sony consolidates investment funds as structured entities in the Financial Services segment. The investment funds are designed so that voting or similar rights are not the dominant factor in deciding who controls these entities, but it is determined that Sony has control over these structured entities. Sony has not provided and does not intend to provide any significant financial or other support to any of the consolidated structured entities without contractual obligations to the investment funds. The assets and liabilities of structured entities that are consolidated in the Financial Services segment are limited in their intended use by contractual arrangements. As of March 31, 2022 and 2023, the total assets of these structured entities are 628,297 million yen and 2,486,836 million yen, respectively.The increase in the fiscal year ended March 31, 2023 is primarily due to the transfer of equity securities which were previously directly held into investment funds.
also consolidates several structured entities in the Music and Pictures segment. Sony has not provided and does not intend to provide any significant financial or other support to these structured entities without contractual obligation. The total assets and liabilities for these structured entities were insignificant to Sony’s financial position. | Unconsolidated structured entities |
Certain trade receivable sales programs also involve structured entities. These structured entities are all special purpose entities associated with the sponsor banks. Based on a qualitative assessment, Sony does not consolidate these entities as Sony does not have the power to direct the activities, an obligation to absorb losses, or the right to receive the residual returns of these structured entities. Sony’s maximum exposure to losses from these structured entities is considered insignificant. In the Financial Services segment, Sony enters into securitization transactions for certain housing loans, involving unconsolidated structured entities. Sony derecognizes a financial asset when the contractual right to receive the cash flows from the financial asset is transferred, or when Sony retains the contractual right to receive the cash flows from the financial asset, but assumes a contractual obligation to pay the cash flows without reinvestment or material delay to other recipients in an arrangement, and substantially all the risks and rewards of ownership of the financial asset are transferred to another entity. Since the above securitization transactions do not meet the requirements for derecognition of financial assets, such transferred assets are not derecognized. Sony recorded 182,417 million yen and 168,173 million yen of transferred assets that do not meet the requirement for derecognition of financial assets included in investments and advances in the Financial Services segment as of March 31, 2022 and 2023, respectively. As of March 31, 2022 and 2023, the liabilities recorded from these securitization transactions were 183,886 million yen and 169,500 million yen, respectively, which are included in the current portion of long-term debt and long-term debt. The liabilities will be settled when the payment for the transferred assets is executed and until this time, Sony is unable to utilize the transferred assets. The transferee of the transferred assets has recourse only to the transferred asset, and as of March 31, 2022 and 2023, the fair value of the transferred assets are 187,555 million yen and 170,695 million yen, respectively and the associated liabilities are 186,702 million yen and 169,931 million yen, respectively.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES In addition to the above, in the Financial Services segment, Sony makes investments in structured entities. Sony’s investments in such structured entities include securitized products, foreign corporate bonds and other investments. The following tables present the carrying amount of the investments of unconsolidated structured entities, the presentation in the consolidated statements of financial position, and the maximum exposure to loss associated with these investments as of March 31, 2022 and 2023. Maximum exposure to loss does not reflect Sony’s estimate of the actual losses that could result from adverse changes, nor does it reflect the economic hedges Sony enters into to reduce its exposure. The risks associated with structured entities in which Sony is involved are limited to the amount recorded in the consolidated statements of financial position and the amount of commitments. | | | | | | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of financial position | | | | | | | Investments and advances in the Financial Services segment
| | | Investments and advances in the Financial Services segment
| | |
| | | | | — | | | | 356,862 | | | | — | | | | 356,862 | | Foreign corporate bonds *1 | | | 28,412 | | | | 168,167 | | | | — | | | | 196,579 | | | | | 2 | | | | 247,394 | | | | 24,697 | | | | 286,662 | | | | | | | | | | | | | | | | | | | | | | 28,414 | | | | 772,423 | | | | 24,697 | | | | 840,103 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Presentation in the consolidated statements of financial position | | | | | | | Investments and advances in the Financial Services segment
| | | Investments and advances in the Financial Services segment
| | |
| | | | | — | | | | 401,642 | | | | — | | | | 401,642 | | Foreign corporate bonds *1 | | | 20,806 | | | | 186,878 | | | | — | | | | 207,684 | | | | | — | | | | 286,066 | | | | 25,464 | | | | 332,076 | | | | | | | | | | | | | | | | | | | | | | 20,806 | | | | 874,586 | | | | 25,464 | | | | 941,402 | | | | | | | | | | | | | | | | | | |
*1 | Foreign corporate bonds primarily include repackaged bonds.
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*2 | Other investments primarily include investment funds.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES The following table sets forth the major consolidated subsidiaries owned, directly or indirectly, by Sony Group Corporation. On August 9, 2021, Sony PicturesInteractive Entertainment Inc. (“SPE”), a wholly-owned subsidiary of Sony, through Funimation Global Group, LLC (“Funimation”), acquired 100% of the equity interest in Ellation Holdings, Inc. (“Ellation”), a subsidiary of AT&T Inc., which operates the anime business “Crunchyroll”. Funimation is a joint venture between SPE and Aniplex Inc., a subsidiary of | | Japan | | 100.0 | Sony Music Entertainment (Japan) Inc. The consideration for the acquisition | | Japan | | 100.0 | Sony Corporation | | Japan | | 100.0 | Sony Global Manufacturing & Operations Corporation | | Japan | | 100.0 | Sony Semiconductor Solutions Corporation | | Japan | | 100.0 | Sony Semiconductor Manufacturing Corporation | | Japan | | 100.0 | Sony Network Communications Inc. | | Japan | | 100.0 | Sony Marketing Inc. | | Japan | | 100.0 | Sony Storage Media Solutions Corporation | | Japan | | 100.0 | Sony Financial Group Inc. | | Japan | | 100.0 | Sony Life Insurance Co., Ltd. | | Japan | | 100.0 | Sony Bank Inc. | | Japan | | 100.0 | Sony Assurance Inc. | | Japan | | 100.0 | Sony Corporation of 135,938 million yen (1,237 million U.S. dollars) was paid in cash. As a result of the acquisition, Ellation has become a wholly-owned subsidiary ofAmerica | | U.S.A. | | 100.0 | Sony Interactive Entertainment LLC | | U.S.A. | | 100.0 | Sony Music Entertainment | | U.S.A. | | 100.0 | Sony Music Publishing LLC | | U.S.A. | | 100.0 | Sony Pictures Entertainment Inc. | | U.S.A. | | 100.0 | Sony Electronics Inc. | | U.S.A. | | 100.0 | Sony. On February 24, 2022, Funimation changed its company name to Crunchyroll, LLC.Sony Europe B.V.
| | U.K. | | 100.0 | Sony Interactive Entertainment Europe Ltd. | | U.K. | | 100.0 | Sony Global Treasury Services Plc | | U.K. | | 100.0 | Sony Overseas Holding B.V. | | Netherlands | | 100.0 | | | China | | 100.0 | Sony EMCS (Malaysia) Sdn. Bhd. | | Malaysia | | 100.0 | Sony Electronics (Singapore) Pte. Ltd. | | Singapore | | 100.0 | |
Crunchyroll is aservice, connecting anime and manga fans across more than 200 countries and territories. Crunchyroll provides services including subscriptionadvertising-basedmobile games, manga, events, merchandise and distribution. The acquisition has brought together two animation distribution brands, Funimation and Crunchyroll, allowing Sony to expandfan-centric
offerings. The global unification and integration of the two brands and services under the Crunchyroll brand started in March 2022. | As a result of the acquisition, Sony consolidated Ellation by using the acquisition method of accounting and recorded the fair value of the identifiable assets acquired, liabilities assumed and residual goodwill of Ellation. The following table summarizes the final fair values assigned to the assets and liabilities of Ellation that were recorded in the Pictures segment. The measurement period adjustments were not material.Fiscal year ended March 31, 2022
|
Acquisition of Ellation Holdings, Inc. On August 9, 2021, Sony Pictures Entertainment Inc. (“SPE”), a wholly-owned subsidiary of Sony, through Funimation Global Group, LLC (“Funimation”), acquired 100% of the equity interest in Ellation Holdings, Inc. (“Ellation”), a subsidiary of AT&T Inc., which operates the anime business “Crunchyroll.” Funimation is a joint venture between SPE and Aniplex Inc., a subsidiary of Sony Music Entertainment (Japan) Inc. The consideration for the acquisition of 135,938 million yen (1,237 million U.S. dollars) was paid in cash. As a result of the acquisition, Ellation has become a wholly-owned subsidiary of Sony. On February 24, 2022, Funimation changed its company name to Crunchyroll, LLC. Crunchyroll is a DTC service, connecting anime and manga fans across more than 200 countries and territories. Crunchyroll provides services including subscriptionadvertising-basedmobile games, manga, events, merchandise and distribution. The acquisition has brought together two animation distribution brands, Funimation and Crunchyroll, allowing Sony to expandfan-centric offerings. The global unification and integration of the two brands and services under the Crunchyroll brand started in March 2022.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES As a result of the acquisition, Sony consolidated Ellation by using the acquisition method of accounting and recorded the fair value of the identifiable assets acquired, liabilities assumed and residual goodwill of Ellation. The following table summarizes the final fair values assigned to the assets and liabilities of Ellation that were recorded in the Pictures segment. | | | | | | | | | Cash and cash equivalents | | | 8,379 | | Trade and other receivables, and contract assets | | | 3,714 | | | | | 3,295 | | | | | 4,962 | | | | | 81,250 | | | | | 36,266 | | | | | 35,697 | | | | | 2,512 | | | | | | | | | | 176,075 | | | | | | | | | | 17,365 | | Other current liabilities | | | 7,723 | | | | | 4,386 | | | | | 9,408 | | | | | 659 | | | | | | | | | | 39,541 | | | | | | |
Content assets and other intangible assets mainly consist of license agreements and customer relationships. Goodwill represents unidentifiable intangible assets, such as future growth from new revenue streams and synergies with existing Sony assets and businesses, and is calculated as the excess of the purchase price over the estimated fair value of the tangible and intangible assets acquired and is not deductible for tax purposes. The goodwill recorded in connection with the acquisition is included in the Pictures segment. Revenue and net income attributable to Ellation since the date of acquisition included in Sony’s consolidated statements of income for the fiscal year ended March 31, 2022 and pro forma results of operations have not been presented because the effect of the acquisition was not material. |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Content assets and other intangible assets mainly consist of license agreements and customer relationships. Goodwill represents unidentifiable intangible assets, such as future growth from new revenue streams and synergies with existing Sony assets and businesses, and is calculated as the excess of the purchase price over the estimated fair value of the tangible and intangible assets acquired and is not deductible for tax purposes. The goodwill recorded in connection with the acquisition is included in the Pictures segment.
Revenue and net income attributable to Ellation since the date of acquisition included in Sony’s consolidated statements of income and pro forma results of operations have not been presented because the effect of the acquisition was not material.
During the fiscalFiscal year ended March 31, 2021, Sony completed other acquisitions for total consideration of 18,258 million yen which was paid for primarily in cash and there was 0 material contingent consideration subject to future change. As a result of these acquisitions, Sony recorded 15,679 million yen of goodwill and 6,061 million yen of intangible assets.
During the fiscal year ended March 31, 2022, Sony completed other acquisitions for total consideration of 175,878 million yen which was paid for primarily in cash and there was 0 material contingent consideration subject to future change. As a result of these acquisitions, Sony recorded 116,394 million yen of goodwill and 64,348 million yen of intangible assets.
No significant amounts have been allocated toin-process
research and development and all of the entities described above have been consolidated into Sony’s results of operations since their respective acquisition dates. Other information including pro forma results of operations has not been presented because the effects of other acquisitions, individually and in aggregate, were not material.Acquisition of Bungie, Inc. On July 15, 2022, Sony Interactive Entertainment LLC (“SIE”), a wholly-owned subsidiary of Sony, completed the acquisition of 100% of the shares of Bungie, Inc. (“Bungie”), an independent videogame developer in the United States. As a result of this acquisition, Bungie has become a wholly-owned subsidiary of Sony. This acquisition gives SIE access to Bungie’s approach to live game services and technology expertise. The total consideration of this acquisition, which was determined after customary working capital and other adjustments, was 510,459 million yen (3,701 million U.S. dollars), inclusive of the purchase price and committed employee incentives. Of the total consideration, 347,768 million yen (2,522 million U.S. dollars) was allocated to the purchase consideration of this acquisition, and the remaining 162,691 million yen (1,179 million U.S. dollars) was mainly allocated to deferred payments to employee shareholders that are conditional upon their continuous employment, and other retention incentives. The deferred payments and other retention incentives will be expensed over the required post-acquisition service periods. The fair value of the purchase consideration of this acquisition as of the acquisition date was 333,859 million yen (2,421 million U.S. dollars) which consisted of upfront cash consideration of 207,511 million yen (1,505 million U.S. dollars), deferred consideration of 84,410 million yen (612 million U.S. dollars), and contingent consideration of 41,938 million yen (304 million U.S. dollars) that is subject to employee shareholders’ continuous employment and represents the vested portion of the total vesting term of replacement awards that existed as of the acquisition date. Deferred consideration and contingent consideration are included in other financial liabilities (current andnon-current) in the consolidated statements of financial position.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Sony’s consolidated statements of income for the fiscal year ended March 31, 2023 include net loss after income taxes of 47,420 million yen (338 million U.S. dollars), attributable to Bungie since the acquisition date, including the deferred payments and other retention incentives arising out of this acquisition and amortization of intangible assets recognized as of the acquisition date. Revenue after elimination of intercompany transactions attributable to Bungie since the acquisition date for the fiscal year ended March 31, 2023 has not been presented because the revenue was not material. Sony consolidated Bungie by using the acquisition method of accounting and recorded the fair value of the identifiable assets acquired, liabilities assumed and residual goodwill of Bungie. The following table summarizes the final fair values assigned to the assets and liabilities of Bungie that were recorded in the G&NS segment. The measurement period adjustments were not material. | | | | | | | | | Cash and cash equivalents | | | 37,800 | | Trade and other receivables, and contract assets | | | 5,093 | | | | | 3,412 | | Property, plant and equipment | | | 7,481 | | | | | 15,540 | | | | | 193,801 | | | | | 45,512 | | | | | 66,257 | | | | | 7,297 | | | | | 3,564 | | | | | | | | | | 385,757 | | | | | | | | | | 3,060 | | Other current liabilities | | | 12,195 | | | | | 30,944 | | | | | 5,699 | | | | | | | | | | 51,898 | | | | | | |
Content assets and other intangible assets mainly consist of license agreements and software. Goodwill mainly represents future growth from new revenue streams and synergies with existing Sony businesses and is not deductible for tax purposes. Goodwill recorded in connection with the acquisition is included in the G&NS segment. Pro forma results of operations have not been presented because the effect of the acquisition is not material. During the fiscal year ended March 31, 2021, Sony completed other acquisitions fortotal consideration of 18,258 million yen which was paid for primarily in cash and there was no material contingent consideration subject to future change. As a result of these acquisitions, Sony recorded 15,679 million yen of goodwill and 6,061 million yen of intangible assets. During the fiscal year ended March 31, 2022, Sony completed other acquisitions fora total consideration of 175,878 million yen which was paid for primarily in cash and there was no material contingent consideration subject to future change. As a result of these acquisitions, Sony recorded 116,394 million yen of goodwill and 64,348 million yen of intangible assets. During the fiscal year ended March 31, 2023, Sony completed other acquisitions fora total consideration of 92,743 million yen which was paid for primarily in cash and there was no material contingent consideration subject to future change. As a result of these acquisitions, Sony recorded 80,698 million yen of goodwill and 29,154 million yen of intangible assets. No significant amountswere allocated toin-process research and development and all of the entities described above have been consolidated into Sony’s results of operations since their respective acquisition dates. Other information including pro forma results of operations has not been presented because the effects of other acquisitions, individually and in aggregate, wereno t material.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES Fiscal year ended March 31, 2022 Transfer of certain operations of Game Show Network, LLC On December 6, 2021, Sony completed the transfer of GSN Games, a division of Game Show Network, LLC, a wholly-owned subsidiary in the Pictures segment, to Scopely, Inc. (“Scopely”). The consideration for the transaction was 115,054 million yen (1,011 million U.S. dollars), of which Sony received 58,131 million yen (511 million U.S. dollars) in cash and 56,923 million yen (500 million U.S. dollars) in preferred stock of Scopely. This preferred stock is measured at fair value as an equity instrument and subsequent changes in the fair value will be recognized in other comprehensive income. As a result of the completion of this transfer, Sony recognized a gain of 70,020 million yen (615 million U.S. dollars) within other operating (income) expense, net in the consolidated statements of income for the fiscal year ended March 31, 2022.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| Related party transactions |
| Account balances and transactions with associates and joint ventures accounted for under the equity method
|
Account balances and transactions with associates and joint ventures accounted for under the equity method are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trade and other accounts receivable | | | | | | | | | | | | | | | | 6,236 | | | | 6,875 | | | | 9,587 | | | | | 7,383 | | | | 1,953 | | | | 5,143 | | | | | | | | | | | | | | | | | | 13,619 | | | | 8,828 | | | | 14,730 | | | | | | | | | | | | | | | Other current assets | | | | | | | | | | | | | | | | 9,757 | | | | 16,097 | | | | 7,042 | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | 9,757 | | | | 16,097 | | | | 7,042 | | | | | | | | | | | | | | | Accounts payable, trade | | | | | | | | | | | | | | | | 1,437 | | | | 1,356 | | | | 1,219 | | | | | 60 | | | | 53 | | | | 157 | | | | | | | | | | | | | | | | | | 1,497 | | | | 1,409 | | | | 1,376 | | | | | | | | | | | | | | | Short-term borrowings | | | | | | | | | | | | | | | | — | | | | 2,847 | | | | 2,131 | | | | | 31,557 | | | | 18,520 | | | | 20,132 | | | | | | | | | | | | | | | | | | 31,557 | | | | 21,367 | | | | 22,263 | | | | | | | | | | | | | | | Lease liabilities and other | | | | | | | | | | | | | | | | 36,957 | | | | 50,748 | | | | 64,552 | | Joint ventures | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | 36,957 | | | | 50,748 | | | | 64,552 | | | | | | | | | | | | | | | Accounts payable for property, plant and equipment | | | | | | | | | | | | | | | | 68 | | | | 1,566 | | | | 7,189 | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | 68 | | | | 1,566 | | | | 7,189 | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | Sales | | | | | | | | | | | | 15,087 | | | | 20,385 | | | | | 17,985 | | | | 27,374 | | | | | | | | | | | | | | 33,072 | | | | 47,759 | | | | | | | | | | | Purchases | | | | | | | | | | | | 3,083 | | | | 3,271 | | | | | 1 | | | | 785 | | | | | | | | | | | | | | 3,084 | | | | 4,056 | | | | | | | | | | | Lease payments and other | | | | | | | | | | | | 8,028 | | | | 11,180 | | | | | — | | | | — | | | | | | | | | | | | | | 8,028 | | | | 11,180 | | | | | | | | | | | Payments for property, plant and equipment | | | | | | | | | Associates | | | 1,272 | | | | 12,052 | | Joint ventures | | | — | | | | — | | | | | | | | | | | Total | | | 1,272 | | | | 12,052 | | | | | | | | | | |
Sony has agreements with shareholders of associates to make cash investments in the associates in the future. The investment commitments as of March 31, 2022, amounted to 39,231 million yen.
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Primary account balances and transactions with associates and joint ventures accounted for under the equity method are as follows: | | | | | | | | | | | | | | | | | | | | | | | | Trade and other accounts receivable | | | | | | | | | | | | 9,587 | | | | 7,779 | | | | | 5,143 | | | | 6,326 | | | | | | | | | | | | | | 14,730 | | | | 14,105 | | | | | | | | | | | Other current assets | | | | | | | | | | | | 7,042 | | | | 7,747 | | | | | — | | | | — | | | | | | | | | | | | | | 7,042 | | | | 7,747 | | | | | | | | | | | Accounts payable, trade | | | | | | | | | | | | 1,219 | | | | 1,425 | | | | | 157 | | | | 228 | | | | | | | | | | | | | | 1,376 | | | | 1,653 | | | | | | | | | | | Short-term borrowings | | | | | | | | | | | | 2,131 | | | | 3,124 | | | | | 20,132 | | | | 25,218 | | | | | | | | | | | | | | 22,263 | | | | 28,342 | | | | | | | | | | | Lease liabilities and other | | | | | | | | | | | | 64,552 | | | | 74,955 | | | | | — | | | | — | | | | | | | | | | | | | | 64,552 | | | | 74,955 | | | | | | | | | | | Accounts payable for property, plant and equipment | | | | | | | | | | | | 7,189 | | | | 12,050 | | | | | — | | | | — | | | | | | | | | | | | | | 7,189 | | | | 12,050 | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Sales | | | | | | | | | | | | | | | | 15,087 | | | | 20,385 | | | | 15,040 | | | | | 17,985 | | | | 27,374 | | | | 30,220 | | | | | | | | | | | | | | | | | | 33,072 | | | | 47,759 | | | | 45,260 | | | | | | | | | | | | | | | Purchases | | | | | | | | | | | | | | | | 3,083 | | | | 3,271 | | | | 4,450 | | | | | 1 | | | | 785 | | | | 649 | | | | | | | | | | | | | | | | | | 3,084 | | | | 4,056 | | | | 5,099 | | | | | | | | | | | | | | | Lease payments and other | | | | | | | | | | | | | | | | 8,028 | | | | 11,180 | | | | 13,720 | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | 8,028 | | | | 11,180 | | | | 13,720 | | | | | | | | | | | | | | | Payments for property, plant and equipment | | | | | | | | | | | | | | | | 1,272 | | | | 12,052 | | | | 20,553 | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | 1,272 | | | | 12,052 | | | | 20,553 | | | | | | | | | | | | | | |
Sony has agreements with shareholders of associates to make cash investments in the associates in the future. The investment commitments as of March 31, 2022 and 2023, amounted to 39,231 million yen and 39,047 million yen, respectively. | Compensation for key management personnel
|
Compensation for key management personnel |
Compensation for key management personnel for the fiscal years ended March 31, 2021, 2022 and 2023 is presented as follows: | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | | | | Short-term employee benefits | | | 1,202 | | | | 1,480 | | | | 1,831 | | | | | 2,329 | | | | 1,597 | | | | 1,928 | | | | | | | | | | | | | | | | | | 3,531 | | | | 3,077 | | | | 3,759 | | | | | | | | | | | | | | |
Compensation for key management personnel is the remuneration for Directors (including outside Directors) and Corporate executive officers of Sony Group Corporation. | Purchase commitments, contingent liabilities and 2022 is presented as follows:other |
| | | | | | | | | | | | | | | Fiscal year ended March 31 | | | | | | | | | Short-term employee benefits | | | 1,202 | | | | 1,480 | | | | | 2,329 | | | | 1,597 | | | | | | | | | | | | | | 3,531 | | | | 3,077 | | | | | | | | | | |
Subsidiaries in the Financial Services segment have lines of credit in accordance with loan agreements with their customers. As of March 31, 2022 and 2023, the total unused portion of the lines of credit extended under these contracts was 33,587 million yen and 35,831 million yen, respectively. | Compensation for key management personnel is the remuneration for Directors (including outside Directors) and Corporate executive officers of Sony Group Corporation.Purchase commitments
|
Purchase commitments as of March 31, 2022 and 2023 amounted to 1,000,833 million yen and 1,084,774 million yen, respectively. The amount of these purchase commitments covers the purchase consideration for property, plant and equipment, intangible assets, other goods and other services. The major components of these commitments are as follows: | Purchase commitments, contingent liabilities and other
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Subsidiaries in the Financial Services segment have lines of credit in accordance with loan agreements with their customers. As of April 1, 2020 and March 31, 2021 and 2022, the total unused portion of the lines of credit extended under these contracts was 34,306 million yen, 37,322 million yen and 33,587 million yen,
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Purchase commitments as of April 1, 2020 and March 31, 2021 and 2022 amounted to 680,739 million yen, 629,474 million yen and 1,000,833 million yen, respectively. The amount of these purchase commitments covers the purchase consideration for property, plant and equipment, intangible assets, other goods and other services. The major components of these commitments are as follows:
Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of motion pictures and television programming as well as agreements with third parties to acquire completed motion pictures, or certain rights therein, and to acquire the rights to broadcast certain live action sporting events. These agreements cover various periods, mainly within three years from the end of each period. As of April 1, 2020 and March 31, 2021 and 2022, these subsidiaries were committed to make payments under such contracts of 126,917 million yen, 105,921 million yen and 101,284 million yen, respectively.
subsidiaries in the Music segment have entered into contracts with recording artists, songwriters and companies for the future production, distribution and/or licensing of music products. These contracts cover various periods, mainly within
five yearsfrom the end of each period. As of April
1,
2020and March
31,
2021and
2022, these subsidiaries were committed to make payments of
128,678 million yen,
149,021 million yen and
153,920 million yen, respectively, under such contracts.
Certain subsidiaries in the G&NS segment have entered into long-term contracts for the development, distribution and publishing of game software. These contracts cover various periods, mainly within seven years from the end of each period. As of April 1, 2020 and March 31, 2021 and 2022, these subsidiaries were committed to make payments of 29,243 million yen, 32,959 million yen and 34,842 million yen, respectively, under such contracts.
In addition to the above, Sony has entered into purchase contracts for property, plant and equipment and intangible assets. As of April 1, 2020 and March 31, 2021 and 2022, Sony has committed to make payments of 199,145 million yen, 135,297 million yen and 246,263 million yen, respectively, under such contracts.
Sony has entered into purchase contracts for materials. As of April 1, 2020 and March 31, 2021 and 2022, Sony has committed to make payments of 115,670 million yen, 96,589 million yen and 265,518 million yen, respectively, under such contracts.
Sony Group Corporation and certain of its subsidiaries are defendants or otherwise involved in pending legal and regulatory proceedings. However, based upon the information currently available, Sony believes that the outcome from such legal and regulatory proceedings would not have a material impact on Sony’s results of operations and financial position.
Sony has issued guarantees that contingently require payments to guaranteed parties if certain specified events or conditions occur. The maximum potential amount of future payments under these guarantees as of April 1, 2020 and March 31, 2021 and 2022 amounted to 2,214 million yen, 529 million yen and 501 million yen, respectively.
Sony has adopted IFRS from the first quarter of the fiscal year ended March 31, 2022. The latest consolidated financial statements under U.S. GAAP were prepared for the fiscal year ended March 31, 2021, and the date of transition to IFRS was April 1, 2020
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
IFRS 1 requires that a company adopting IFRS for the first-time (“first-time adopters”) shall apply IFRS retrospectively. However, IFRS 1 provides certain exemptions that allow first-time adopters to choose not to apply certain standards retrospectively. Sony has adopted the following exemptions:
First-time adopters may choose not to apply IFRS 3 “Business Combinations” (“IFRS 3”) retrospectively to business combinations that occurred before the date of transition to IFRS. Sony has applied this exemption and chosen not to apply IFRS 3 retrospectively to business combinations that occurred before the date of transition to IFRS. Therefore, the carrying amounts of goodwill generated in business combinations that occurred prior to the date of transition to IFRS were based on the carrying amounts determined under U.S. GAAP at the date of transition to IFRS.
Sony performed an impairment test on goodwill at the date of transition to IFRS regardless of whether there were any indications that the goodwill may be impaired, refer to Note 3 I. Significant accounting policies (10).
Exchange differences on translating foreign operations
First-time adopters may choose to deem the cumulative exchange differences on translating foreign operations as zero at the date of transition to IFRS. Sony has chosen to apply this exemption and deemed all cumulative exchange differences on translating foreign operations as zero at the date of transition to IFRS.
Designation of financial instruments recognized before the date of transition to IFRS
First-time adopters may designate an investment in an equity instrument as an investment recognized at fair value through other comprehensive income in accordance with IFRS 9 “Financial Instruments” based on the facts and circumstances that existed at the date of transition to IFRS. Sony has applied this exemption and designated some equity instruments at fair value in other comprehensive income at the date of transition to IFRS.
Recognition of ROU assets and lease liabilities
When first-time adopters recognize ROU assets and lease liabilities as a lessee, they are permitted to measure ROU assets and lease liabilities at the date of transition to IFRS. Sony measured all lease liabilities at the date of transition to IFRS at the present value of the remaining lease payments, discounted using Sony’s incremental borrowing rate at the date of transition to IFRS. Sony recognized ROU assets equal to the amount of lease liabilities at the date of transition to IFRS.
| Mandatory exception under IFRS 1
|
IFRS 1 prohibits the retrospective application of IFRS concerning “estimates,”“non-controlling
interests,” “classification and measurement of financial instruments” and other items. Sony applied these items prospectively from the date of transition to IFRS.The reconciliations required to be disclosed in the first IFRS financial statements are described in the reconciliations as below. “Reclassification” includes items that do not affect retained earnings and comprehensive income, while “Recognition and measurement differences” includes items that affect retained earnings and comprehensive income.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Reconciliation of equity at the date of transition to IFRS (April 1, 2020)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Recognition and measurement differences | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | 1,512,357 | | | | — | | | | 166 | | | | 1,512,523 | | | | | Cash and cash equivalents | Marketable securities | | | 1,847,772 | | | | (1,847,772 | ) | | | — | | | | — | | | a | | | | | | — | | | | 327,092 | | | | — | | | | 327,092 | | | a,f | | Investments and advances in the Financial Services segment | Notes and accounts receivable, trade and contract assets | | | 1,028,793 | | | | (1,028,793 | ) | | | — | | | | — | | | b | | | | | | — | | | | 1,195,228 | | | | (894 | ) | | | 1,194,334 | | | b,c | | Trade and other receivables, and contract assets | Allowance for credit losses | | | (26,153 | ) | | | 26,153 | | | | — | | | | — | | | b | | | Inventories | | | 558,452 | | | | — | | | | 1,327 | | | | 559,779 | | | | | Inventories | Other receivables | | | 188,076 | | | | (188,076 | ) | | | — | | | | — | | | c | | | | | | — | | | | 135,265 | | | | 217 | | | | 135,482 | | | d | | Other financial assets | Prepaid expenses and other current assets | | | 594,009 | | | | (153,473 | ) | | | 1,438 | | | | 441,974 | | | d | | Other current assets | | | | | | | | | | | | | | | | | | | | | | | | | 5,703,306 | | | | (1,534,376 | ) | | | 2,254 | | | | 4,171,184 | | | | | Total current assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 458,853 | | | | (458,853 | ) | | | — | | | | — | | | e | | | | | | | | | | | | | | | | | | | | | | | | Investments and advances: | | | | | | | | | | | | | | | | | | | | | Affiliated companies | | | 207,922 | | | | (608 | ) | | | (3,023) | | | | 204,291 | | | | | Investments accounted for using the equity method | Securities investments and other | | | 12,526,990 | | | | (12,526,990 | ) | | | — | | | | — | | | f | | | Allowance for credit losses | | | (6,341 | ) | | | 6,341 | | | | — | | | | — | | | | | | | | | — | | | | 13,906,535 | | | | 2,445,750 | | | | 16,352,285 | | | a,f,D | | Investments and advances in the Financial Services segment | Property, plant and equipment: | | | | | | | | | | | | | | | | | | | | | Land | | | 81,482 | | | | (81,482 | ) | | | — | | | | — | | | | | | Buildings | | | 659,556 | | | | (659,556 | ) | | | — | | | | — | | | | | | Machinery and equipment | | | 1,725,720 | | | | (1,725,720 | ) | | | — | | | | — | | | | | | Construction in progress | | | 76,391 | | | | (76,391 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Less — Accumulated depreciation | | | 1,634,505 | | | | (1,634,505 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 921,513 | | | | (4,315 | ) | | | 917,198 | | | | | Property, plant and equipment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating leaseassets | | | 359,510 | | | | (359,510 | ) | | | — | | | | — | | | g | | | Finance leaseassets | | | 33,100 | | | | (33,100 | ) | | | — | | | | — | | | g | | | | | | — | | | | 376,998 | | | | (3,716 | ) | | | 373,282 | | | g | | assets | Intangibles, net | | | 906,310 | | | | (906,310 | ) | | | — | | | | — | | | e | | | Goodwill | | | 783,888 | | | | — | | | | (92,959 | ) | | | 690,929 | | | C | | Goodwill | | | | — | | | | 991,611 | | | | 1,033 | | | | 992,644 | | | e | | Content assets | | | | — | | | | 373,552 | | | | 3,948 | | | | 377,500 | | | e | | Other intangible assets | Deferred insurance acquisition costs | | | 600,901 | | | | — | | | | (412,997 | ) | | | 187,904 | | | E | | Deferred insurance acquisition costs | Deferred income taxes | | | 210,417 | | | | 87 | | | | (171 | ) | | | 210,333 | | | | | Deferred tax assets | | | | — | | | | 298,469 | | | | 23,252 | | | | 321,721 | | | f,h,D | | Other financial assets | Other | | | 339,284 | | | | (154,853 | ) | | | (16,636 | ) | | | 167,795 | | | h,B | | Other non-current assets | | | | | | | | | | | | | | | | | | | | | | | | | 17,329,478 | | | | 1,526,238 | | | | 1,940,166 | | | | 20,795,882 | | | | | Total non-current assets | | | | | | | | | | | | | | | | | | | | | | | | | 23,032,784 | | | | (8,138 | ) | | | 1,942,420 | | | | 24,967,066 | | | | | | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Recognition and measurement differences | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Short-term borrowings | | | 810,176 | | | | 13,869 | | | | — | | | | 824,045 | | | | | Short-term borrowings | Current portion of long-term debt | | | 29,807 | | | | 69,116 | | | | — | | | | 98,923 | | | i | | Current portion of long-term debt | Current portion of long-term operating lease liabilities | | | 68,942 | | | | (68,942 | ) | | | — | | | | — | | | i | | | Notes and accounts payable, trade | | | 380,810 | | | | (380,810 | ) | | | — | | | | — | | | j | | | | | | — | | | | 1,340,573 | | | | (30,037 | ) | | | 1,310,536 | | | j,k,m | | Trade and other payables | Accounts payable, other and accrued expenses | | | 1,630,197 | | | | (1,630,197 | ) | | | — | | | | — | | | k | | | Deposits from customers in the banking business | | | 2,440,783 | | | | (93,396 | ) | | | — | | | | 2,347,387 | | | l | | Deposits from customers in the banking business | Accrued income and other taxes | | | 145,996 | | | | (60,650 | ) | | | — | | | | 85,346 | | | | | Income taxes payables | | | | — | | | | 163,007 | | | | — | | | | 163,007 | | | k | | Participation and residual liabilities in the Pictures segment | | | | — | | | | 56,152 | | | | — | | | | 56,152 | | | k,m | | Other financial liabilities | Other | | | 733,732 | | | | 527,859 | | | | 2,353 | | | | 1,263,944 | | | k,m | | Other current liabilities | | | | | | | | | | | | | | | | | | | | | | Total current liabilities | | | 6,240,443 | | | | (63,419 | ) | | | (27,684 | ) | | | 6,149,340 | | | | | Total current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt | | | 634,966 | | | | 305,871 | | | | (1,807 | ) | | | 939,030 | | | i | | Long-term debt | Long-term operating lease liabilities | | | 314,836 | | | | (314,836 | ) | | | — | | | | — | | | i | | | Accrued pension and severance costs | | | 324,655 | | | | 4,355 | | | | 611 | | | | 329,621 | | | B | | Defined benefit liabilities | Deferred income taxes | | | 548,034 | | | | 87 | | | | 493,035 | | | | 1,041,156 | | | F | | Deferred tax liabilities | Future insurance policy benefits and other | | | 6,246,047 | | | | — | | | | 273,530 | | | | 6,519,577 | | | E | | Future insurance policy benefits and other | Policyholders’ account in the life insurance business | | | 3,642,271 | | | | — | | | | (2,261 | ) | | | 3,640,010 | | | E | | Policyholders’ account in the life insurance business | | | | — | | | | 122,706 | | | | (3,004 | ) | | | 119,702 | | | n | | Participation and residual liabilities in the Pictures segment | | | | — | | | | 146,834 | | | | — | | | | 146,834 | | | l,n,o | | Other financial liabilities | Other | | | 289,285 | | | | (201,969 | ) | | | 4 | | | | 87,320 | | | n | | Other non-current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | 12,000,094 | | | | 63,048 | | | | 760,108 | | | | 12,823,250 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,240,537 | | | | (371 | ) | | | 732,424 | | | | 18,972,590 | | | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interest | | | 7,767 | | | | (7,767 | ) | | | — | | | | — | | | o | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sony Group Corporation’s stockholders’ equity: | | | | | | | | | | | | | | | | | | | | Sony Group Corporation’s stockholders’ equity: | Common stock | | | 880,214 | | | | — | | | | — | | | | 880,214 | | | | | Common stock | Additional paid-in capital | | | 1,289,719 | | | | — | | | | 7,835 | | | | 1,297,554 | | | | | Additional paid-in capital | Retained earnings | | | 2,765,187 | | | | — | | | | (815,490 | ) | | | 1,949,697 | | | G | | Retained earnings | Accumulated other comprehensive income | | | (580,980 | ) | | | — | | | | 1,560,456 | | | | 979,476 | | | | | Accumulated other comprehensive income | Treasury stock, at cost | | | (232,503 | ) | | | — | | | | — | | | | (232,503 | ) | | | | Treasury stock, at cost | | | | | | | | | | | | | | | | | | | | | | | | | 4,121,637 | | | | — | | | | 752,801 | | | | 4,874,438 | | | | | Equity attributable to Sony Group Corporation’s stockholders | | | | | | | | | | | | | | | | | | | | | | Noncontrolling interests | | | 662,843 | | | | — | | | | 457,195 | | | | 1,120,038 | | | F | | Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | | | | | 4,784,480 | | | | — | | | | 1,209,996 | | | | 5,994,476 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and equity | | | 23,032,784 | | | | (8,138 | ) | | | 1,942,420 | | | | 24,967,066 | | | | | Total liabilities and equity | | | | | | | | | | | | | | | | | | | | | |
* | “U.S. GAAP” represents the consolidated financial statements under U.S. GAAP for the fiscal year ended March 31, 2020, adjusted for the adoption of the Accounting Standards Updates issued by the Financial Accounting Standards Board effective as of April 1, 2020.
|
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Reconciliation of equity as of March 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Recognition and measurement differences | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | 1,786,982 | | | | — | | | | — | | | | 1,786,982 | | | | | Cash and cash equivalents | Marketable securities | | | 2,902,438 | | | | (2,902,438 | ) | | | — | | | | — | | | a,p | | | | | | — | | | | 412,016 | | | | (34 | ) | | | 411,982 | | | a,f | | Investments and advances in the Financial Services segment | Notes and accounts receivable, trade and contract assets | | | 1,099,300 | | | | (1,099,300 | ) | | | — | | | | — | | | b | | | | | | — | | | | 1,366,991 | | | | (1,498 | ) | | | 1,365,493 | | | b,c | | Trade and other receivables, and contract assets | Allowance for credit losses | | | (29,406 | ) | | | 29,406 | | | | — | | | | — | | | b | | | Inventories | | | 637,391 | | | | — | | | | (723 | ) | | | 636,668 | | | | | Inventories | Other receivables | | | 283,499 | | | | (283,499 | ) | | | — | | | | — | | | c | | | | | | — | | | | 117,522 | | | | 160 | | | | 117,682 | | | d | | Other financial assets | Prepaid expenses and other current assets | | | 538,540 | | | | (141,517 | ) | | | (813 | ) | | | 396,210 | | | d | | Other current assets | | | | | | | | | | | | | | | | | | | | | | | | | 7,218,744 | | | | (2,500,819 | ) | | | (2,908 | ) | | | 4,715,017 | | | | | Total current assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 459,426 | | | | (459,426 | ) | | | — | | | | — | | | e | | | | | | | | | | | | | | | | | | | | | | | | Investments and advances: | | | | | | | | | | | | | | | | | | | | | Affiliated companies | | | 226,218 | | | | (1,132 | ) | | | — | | | | 225,086 | | | | | Investments accounted for using the equity method | Securities investments and other | | | 14,046,196 | | | | (14,046,196 | ) | | | — | | | | — | | | f | | | Allowance for credit losses | | | (8,419 | ) | | | 8,419 | | | | — | | | | — | | | | | | | | | — | | | | 15,639,456 | | | | 1,657,090 | | | | 17,296,546 | | | a,f,D | | Investments and advances in the Financial Services segment | Property, plant and equipment: | | | | | | | | | | | | | | | | | | | | | Land | | | 79,557 | | | | (79,557 | ) | | | — | | | | — | | | | | | Buildings | | | 683,249 | | | | (683,249 | ) | | | — | | | | — | | | | | | Machinery and equipment | | | 1,748,961 | | | | (1,748,961 | ) | | | — | | | | — | | | | | | Construction in progress | | | 100,728 | | | | (100,728 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Less — Accumulated depreciation | | | 1,627,061 | | | | (1,627,061 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 994,676 | | | | (4,135 | ) | | | 990,541 | | | | | Property, plant and equipment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating leaseassets | | | 337,322 | | | | (337,322 | ) | | | — | | | | — | | | g | | | Finance leaseassets | | | 39,772 | | | | (39,772 | ) | | | — | | | | — | | | g | | | | | | — | | | | 365,641 | | | | (7,607 | ) | | | 358,034 | | | g | | assets | Intangibles, net | | | 996,305 | | | | (996,305 | ) | | | — | | | | — | | | e | | | Goodwill | | | 827,149 | | | | (398 | ) | | | (100,642 | ) | | | 726,109 | | | C | | Goodwill | | | | — | | | | 1,062,865 | | | | (318 | ) | | | 1,062,547 | | | e | | Content assets | | | | — | | | | 392,862 | | | | (1,807 | ) | | | 391,055 | | | e | | Other intangible assets | Deferred insurance acquisition costs | | | 657,420 | | | | — | | | | (33,434 | ) | | | 623,986 | | | E | | Deferred insurance acquisition costs | Deferred income taxes | | | 207,470 | | | | (2,649 | ) | | | 10,848 | | | | 215,669 | | | | | Deferred tax assets | | | | — | | | | 663,105 | | | | 32,659 | | | | 695,764 | | | f,h,D | | Other financial assets | Other | | | 361,803 | | | | (137,916 | ) | | | (16,398 | ) | | | 207,489 | | | h,B | | Other non-current assets | | | | | | | | | | | | | | | | | | | | | | | | | 19,136,096 | | | | 2,120,474 | | | | 1,536,256 | | | | 22,792,826 | | | | | Total non-current assets | | | | | | | | | | | | | | | | | | | | | | | | | 26,354,840 | | | | (380,345 | ) | | | 1,533,348 | | | | 27,507,843 | | | | | | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATIONAND
CONSOLIDATED SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Recognition and measurement differences | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Short-term borrowings | | | 1,187,868 | | | | 13,879 | | | | — | | | | 1,201,747 | | | | | Short-term borrowings | Current portion of long-term debt | | | 131,699 | | | | 73,582 | | | | 125 | | | | 205,406 | | | i | | Current portion of long-term debt | Current portion of long-term operating lease liabilities | | | 73,362 | | | | (73,362 | ) | | | — | | | | — | | | i | | | Notes and accounts payable, trade | | | 599,569 | | | | (599,569 | ) | | | — | | | | — | | | j | | | | | | — | | | | 1,632,952 | | | | (36,389 | ) | | | 1,596,563 | | | j,k,m | | Trade and other payables | Accounts payable, other and accrued expenses | | | 1,756,833 | | | | (1,756,833 | ) | | | — | | | | — | | | k | | | Deposits from customers in the banking business | | | 2,773,885 | | | | (91,729 | ) | | | — | | | | 2,682,156 | | | l | | Deposits from customers in the banking business | Accrued income and other taxes | | | 165,406 | | | | (82,594 | ) | | | 1,619 | | | | 84,431 | | | | | Income taxes payables | | | | — | | | | 164,005 | | | | (2,572 | ) | | | 161,433 | | | k | | Participation and residual liabilities in the Pictures segment | | | | — | | | | 54,341 | | | | — | | | | 54,341 | | | k,m,o | | Other financial liabilities | Other | | | 1,126,802 | | | | 234,441 | | | | 6,284 | | | | 1,367,527 | | | k,m,p | | Other current liabilities | | | | | | | | | | | | | | | | | | | | | | Total current liabilities | | | 7,815,424 | | | | (430,887 | ) | | | (30,933 | ) | | | 7,353,604 | | | | | Total current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt | | | 773,294 | | | | 281,086 | | | | (744 | ) | | | 1,053,636 | | | i | | Long-term debt | Long-term operating lease liabilities | | | 290,259 | | | | (290,259 | ) | | | — | | | | — | | | i | | | Accrued pension and severance costs | | | 254,103 | | | | 12,364 | | | | 755 | | | | 267,222 | | | B | | Defined benefit liabilities | Deferred income taxes | | | 366,761 | | | | (2,649 | ) | | | 452,475 | | | | 816,587 | | | F | | Deferred tax liabilities | Future insurance policy benefits and other | | | 6,599,977 | | | | — | | | | 14,608 | | | | 6,614,585 | | | E | | Future insurance policy benefits and other | Policyholders’ account in the life insurance business | | | 4,331,065 | | | | — | | | | (2,171 | ) | | | 4,328,894 | | | E | | Policyholders’ account in the life insurance business | | | | — | | | | 120,712 | | | | (4,175 | ) | | | 116,537 | | | n | | Participation and residual liabilities in the Pictures segment | | | | — | | | | 139,417 | | | | — | | | | 139,417 | | | l,n,o | | Other financial liabilities | Other | | | 294,302 | | | | (201,551 | ) | | | 271 | | | | 93,022 | | | n | | Other non-current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | 12,909,761 | | | | 59,120 | | | | 461,019 | | | | 13,429,900 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,725,185 | | | | (371,767 | ) | | | 430,086 | | | | 20,783,504 | | | | | | | | | | | | | | | | | | | | | | | | | | | Redeemable noncontrolling interest | | | 8,179 | | | | (8,179 | ) | | | — | | | | — | | | o | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sony Group Corporation’s stockholders’ equity: | | | | | | | | | | | | | | | | | | | | Sony Group Corporation’s stockholders’ equity: | Common stock | | | 880,214 | | | | — | | | | — | | | | 880,214 | | | | | Common stock | Additional paid-in capital | | | 1,486,721 | | | | — | | | | 2,876 | | | | 1,489,597 | | | | | Additional paid-in capital | Retained earnings | | | 3,857,152 | | | | — | | | | (942,649 | ) | | | 2,914,503 | | | G | | Retained earnings | Accumulated other comprehensive income | | | (524,020 | ) | | | — | | | | 2,044,277 | | | | 1,520,257 | | | | | Accumulated other comprehensive income | Treasury stock, at cost | | | (124,228 | ) | | | — | | | | — | | | | (124,228 | ) | | | | Treasury stock, at cost | | | | | | | | | | | | | | | | | | | | | | | | | 5,575,839 | | | | — | | | | 1,104,504 | | | | 6,680,343 | | | | | Equity attributable to Sony Group Corporation’s stockholders | | | | | | | | | | | | | | | | | | | | | | Noncontrolling interests | | | 45,637 | | | | (399 | ) | | | (1,242 | ) | | | 43,996 | | | | | Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | | | | | 5,621,476 | | | | (399 | ) | | | 1,103,262 | | | | 6,724,339 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and equity | | | 26,354,840 | | | | (380,345 | ) | | | 1,533,348 | | | | 27,507,843 | | | | | Total liabilities and equity | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Reconciliation of profit or loss for the fiscal year ended March 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Recognition and measurement differences | | | | | | | Sales and operating revenue: | | | | | | | | | | | | | | | | | | | | Sales and financial services revenue: | Net sales | | | 7,252,766 | | | | 79,293 | | | | 1,611 | | | | 7,333,670 | | | q | | Sales | Financial services revenue | | | 1,661,520 | | | | 13,512 | | | | (10,041 | ) | | | 1,664,991 | | | r,D | | Financial services revenue | Other operating revenue | | | 85,074 | | | | (85,074 | ) | | | — | | | | — | | | q | | | | | | | | | | | | | | | | | | | | | | | | | | | 8,999,360 | | | | 7,731 | | | | (8,430 | ) | | | 8,998,661 | | | | | Total sales and financial services revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cost of sales | | | 5,072,596 | | | | (3,850 | ) | | | (2,867 | ) | | | 5,065,879 | | | B | | Cost of sales | Selling, general and administrative | | | 1,469,955 | | | | 61 | | | | 3,138 | | | | 1,473,154 | | | B | | Selling, general and administrative | Financial services expenses | | | 1,488,963 | | | | 12,503 | | | | 208 | | | | 1,501,674 | | | r,D | | Financial services expenses | Other operating expense, net | | | 7,468 | | | | (720 | ) | | | 7,502 | | | | 14,250 | | | C | | Other operating (income) expense, net | | | | | | | | | | | | | | | | | | | | | | | | | 8,038,982 | | | | 7,994 | | | | 7,981 | | | | 8,054,957 | | | | | Total costs and expenses | | | | | | | | | | | | | | | | | | | | | | Equity in net income of affiliated companies | | | 11,487 | | | | — | | | | 64 | | | | 11,551 | | | D | | Share of profit (loss) of investments accounted for using the equity method | | | | | | | | | | | | | | | | | | | | | | | | | 971,865 | | | | (263 | ) | | | (16,347 | ) | | | 955,255 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest and dividends | | | 10,457 | | | | (10,457 | ) | | | — | | | | — | | | | | | Gain on equity securities, net | | | 247,026 | | | | (247,026 | ) | | | — | | | | — | | | | | | Other | | | 6,752 | | | | (6,752 | ) | | | — | | | | — | | | | | | | | | — | | | | 264,692 | | | | (180,900 | ) | | | 83,792 | | | s,D | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest expenses | | | 12,185 | | | | (12,185 | ) | | | — | | | | — | | | | | | Foreign exchange loss, net | | | 16,056 | | | | (16,056 | ) | | | — | | | | — | | | | | | Net periodic benefit costs other than service cost | | | 8,811 | | | | (8,811 | ) | | | — | | | | — | | | | | | Other | | | 6,678 | | | | (6,678 | ) | | | — | | | | — | | | | | | | | | — | | | | 43,924 | | | | (2,842 | ) | | | 41,082 | | | s,B | | | | | | | | | | | | | | | | | | | | | | | | Income before income taxes | | | 1,192,370 | | | | — | | | | (194,405 | ) | | | 997,965 | | | H | | Income before income taxes | | | | | | | | | | | | | | | | | | | | | | | | | 995 | | | | — | | | | (46,926 | ) | | | (45,931 | ) | | I | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,191,375 | | | | — | | | | (147,479 | ) | | | 1,043,896 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income attributable to | Net income attributable to Sony Group Corporation’s stockholders | | | 1,171,776 | | | | — | | | | (142,166 | ) | | | 1,029,610 | | | | | Sony Group Corporation’s stockholders | Net income attributable to noncontrolling interests | | | 19,599 | | | | — | | | | (5,313 | ) | | | 14,286 | | | | | Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Reconciliation of comprehensive income for the fiscal year ended March
31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Recognition and measurement differences | | | | | | | | | | 1,191,375 | | | | — | | | | (147,479 | ) | | | 1,043,896 | | | | | | Other comprehensive income, net of tax — | | | | | | | | | | | | | | | | | | | | Other comprehensive income, net of tax — | | | | | | | | | | | | | | | | | | | | | reclassified to profit or loss | | | | — | | | | — | | | | 144,740 | | | | 144,740 | | | D | | | Pension liability adjustment | | | 12,965 | | | | — | | | | (1,410 | ) | | | 11,555 | | | | | | | | | — | | | | — | | | | 87 | | | | 87 | | | | | investments accounted for | | | | | | | | | | | | | | | | | | | | | reclassified subsequently | Unrealized losses on securities | | | (102,492 | ) | | | — | | | | (103,057 | ) | | | (205,549 | ) | | D,E,F | | | Unrealized gains on derivative instruments | | | 1,513 | | | | — | | | | (1,462 | ) | | | 51 | | | | | | Debt valuation adjustments | | | (3,120 | ) | | | — | | | | — | | | | (3,120 | ) | | | | | Foreign currency translation adjustments | | | 106,826 | | | | (798 | ) | | | 9,293 | | | | 115,321 | | | | | | | | | — | | | | 798 | | | | — | | | | 798 | | | | | investments accounted for | | | | | | | | | | | | | | | | | | | | | | | | | 15,692 | | | | — | | | | 48,191 | | | | 63,883 | | | | | Total other comprehensive income, net of tax | | | | | | | | | | | | | | | | | | | | | | Total comprehensive income | | | 1,207,067 | | | | — | | | | (99,288 | ) | | | 1,107,779 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income attributable to | Comprehensive income attributable to Sony Group Corporation’s stockholders | | | 1,198,836 | | | | — | | | | (80,208 | ) | | | 1,118,628 | | | | | Sony Group Corporation’s stockholders | Comprehensive income attributable to noncontrolling interests | | | 8,231 | | | | — | | | | (19,080 | ) | | | (10,849 | ) | | | | Noncontrolling interests | | | | | | | | | | | | | | | | | | | | | |
a. | “Marketable securities,” which were separately presented under U.S. GAAP, have been reclassified into “Investments and advances in the Financial Services segment” as current assets under IFRS. Investments held for variable annuities and variable life insurance contracts in the life insurance business, which were included
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES | in “Marketable securities” under U.S. GAAP, have been reclassified into “Investments and advances in the Financial Services segment” as current assets ornon-current
assets under IFRS, after considering thecurrent/non-current
distinction based on the purpose of the investments related to the insurance liabilities in accordance with paragraph 66 of IAS 1 “Presentation of Financial Statements” (“IAS 1”). |
Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of motion pictures and television programming as well as agreements with third parties to acquire completed motion pictures, or certain rights therein, and to acquire the rights to broadcast certain live action sporting events. These agreements cover various periods, mainly within four years from the end of each period. As of March 31, 2022 and 2023, these subsidiaries were committed to make payments under such contracts of 101,284 million yen and 125,098 million yen, respectively. b. | “Notes and accounts receivable, trade and contract assets” and “Allowance for credit losses,” which were separately presented under U.S. GAAP, have been reclassified into “Trade and other receivables, and contract assets” under IFRS.
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Certain subsidiaries in the Music segment have entered into contracts with recording artists, songwriters and companies for the future production, distribution and/or licensing of music products. These contracts cover various periods, mainly within five years from the end of each period. As of March 31, 2022 and 2023, these subsidiaries were committed to make payments of 153,920 million yen and 193,576 million yen, respectively, under such contracts. c. | “Other receivables,” which were separately presented under U.S. GAAP, have been reclassified into “Trade and other receivables, and contract assets” under IFRS.
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Certain subsidiaries in the G&NS segment have entered into long-term contracts for the development, distribution and publishing of game software. These contracts cover various periods, mainly within six years from the end of each period. As of March 31, 2022 and 2023, these subsidiaries were committed to make payments of 34,842 million yen and 31,298 million yen, respectively, under such contracts. d. | “Other financial assets,” which were included in “Prepaid expenses and other current assets” under U.S. GAAP, are separately presented under IFRS.
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In addition to the above, Sony has entered into purchase contracts for property, plant and equipment and intangible assets. As of March 31, 2022 and 2023, Sony has committed to make payments of 246,263 million yen and 292,608 million yen, respectively, under such contracts. e. | “Film costs,” which were presented separately, and music catalogs, artist contracts, music distribution rights and other content assets, which were included in “Intangibles, net” under U.S. GAAP are collectively reclassified and presented as “Content assets” under IFRS. “Intangibles, net” other than those reclassified and presented as “Content assets” have been reclassified into “Other intangible assets” under IFRS.
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f. | “Securities investments and other,” which were separately presented under U.S. GAAP, have been reclassified into “Investments and advances in the Financial Services segment” asnon-current
assets for the amounts related to the Financial Services segment and “Other financial assets” asnon-current
assets for the amounts related to all segments excluding the Financial Services segment under IFRS. Housing loans in the banking business, which were included in “Securities investments and other” under U.S. GAAP, have been reclassified into “Investments and advances in the Financial Services segment” as current assets ornon-current
assets under IFRS after considering thecurrent/non-current
distinction based on the terms of the contract in accordance with paragraph 66 of IAS 1. |
g. | “Operating leaseassets” and “Finance leaseassets,” which were separately presented under U.S. GAAP, have been reclassified intoassets” under IFRS. |
h. | “Other financial assets,” which were included in “Other” in other assets under U.S. GAAP, are separately presented under IFRS.
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i. | “Current portion of long-term operating lease liabilities” and “Long-term operating lease liabilities,” which were separately presented under U.S. GAAP, have been reclassified into “Current portion of long-term debt” and “Long-term debt,” respectively under IFRS.
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j. | “Notes and accounts payable, trade,” which were separately presented under U.S. GAAP, have been reclassified into “Trade and other payables” under IFRS.
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k. | “Accounts payable, other and accrued expenses,” which were separately presented under U.S. GAAP, have been reclassified into either “Trade and other payables,” “Participation and residual liabilities in the Pictures segment,” “Other financial liabilities” or “Other current liabilities” under IFRS.
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l. | “Deposits from customers in the banking business,” which were separately presented under U.S. GAAP, have been reclassified into “Other financial liabilities” ofnon-current
liabilities under IFRS, after considering thecurrent/non-current
distinction based on the terms of the contract in accordance with paragraph 69 of IAS 1. |
m. | “Trade and other payables” and “Other financial liabilities,” which were included in current liabilities “Other” under U.S. GAAP, are separately presented under IFRS.
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n. | “Participation and residual liabilities in the Pictures segment” and “Other financial liabilities,” which were included in “Other” in other than current liabilities under U.S. GAAP, are separately presented under IFRS.
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o. | “Redeemable noncontrolling interest,” which was separately presented under U.S. GAAP, has been reclassified into “Other financial liabilities” under IFRS.
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p. | Under U.S. GAAP, securities received as collateral other than cash in lending transactions are accounted for as “Marketable securities” and also as “Other current liabilities” representing Sony’s obligation to return the collateral, which was 373,274 million yen as of March 31, 2021. Under IFRS, the securities received as collateral other than cash shall be recognized in the consolidated statements of financial position if they are sold or the transferor defaults. None of the securities was recognized in the consolidated statements of financial position as of March 31, 2021.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
q. | “Other operating revenue,” which was separately presented under U.S. GAAP, has been reclassified into “Sales” under IFRS.
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r. | Under IFRS, “Financial services revenue” and “Financial services expenses” have increased by the same amount due to the gross up of revenue and expenses related to service transactions, based on the presentation requirements.
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s. | Under IFRS, “Financial income” and “Financial expenses” have been presented separately, based on the presentation requirements.
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Recognition and measurement differences
A. Exchange differences on translating foreign operations
Under IFRS 1, first-time adopters may choose to deem the cumulative exchange differences on translating foreign operations as zero at the date of transition to IFRS. Sony has chosen to apply this exemption and transferred all cumulative exchange differences on translating foreign operations into retained earnings at the date of transition to IFRS.
The impact of this change is as follows:Sony has entered into purchase contracts for materials. As of March 31, 2022 and 2023, Sony has committed to make payments of 265,518 million yen and 288,260 million yen, respectively, under such contracts. | | | | | | | | | | | | | | | | | | | | (Consolidated Statements of Financial Position) | | | | | | | | | Accumulated other comprehensive income | | | (509,872 | ) | | | (510,091 | ) | | | | | | | | | | Adjustment to retained earnings | | | (509,872 | ) | | | (510,091 | ) | | | | | | | | | |
B. Post-employment benefits(3)
| Under U.S. GAAP, past service costs and actuarial gains and losses are deferred in accumulated other comprehensive income, and subsequently reclassified to profit or loss over a certain period of time in the future.Litigation Under IFRS, past service costs are expensed as incurred. Adjustments due to remeasurements of the net defined benefit liabilities or assets, such as actuarial gains and losses, are recognized in other comprehensive income when incurred and immediately transferred to retained earnings and are not reclassified to profit or loss in a subsequent period.
In addition, if the fair value of plan assets is in excess of the present value of defined benefit obligations, the amount of any asset to be recognized is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.
The impact of this change before considering the tax effect is as follows:
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Sony Group Corporation and certain of its subsidiaries are defendants or otherwise involved in pending legal and regulatory proceedings. However, based upon the information currently available, Sony believes that the outcome from such legal and regulatory proceedings would not have a material impact on Sony’s results of operations and financial position. | | | | | | | | | | | | | | | | | | | | (Consolidated Statements of Financial Position) | | | | | | | | | | | | (16,829 | ) | | | (17,083 | ) | Defined benefit liabilities | | | 30 | | | | (62 | ) | Accumulated other comprehensive income | | | (300,385 | ) | | | (277,379 | ) | | | | | | | | | | Adjustment to retained earnings | | | (317,184 | ) | | | (294,524 | ) | | | | | | | | | | | | | | | | | | | | | |
| | (Consolidated Statements of Income) | | | | | | | | (2,193 | ) | Selling, general and administrative | | | (244 | ) | | | | 9,476 | | | | | | | Increase (decrease) in adjustment to income before income taxes | | | 7,039 | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Sony has issued guarantees that contingently require payments to guaranteed parties if certain specified events or conditions occur. The maximum potential amount of future payments under these guarantees as of March 31, 2022 and 2023 amounted to 501 million yen and 458 million yen, respectively. C. Impairment of goodwill34.
| The level at which goodwill is tested for impairment differs between U.S. GAAP and IFRS. Under U.S. GAAP, goodwill is tested for impairment at the reporting unit level. Reporting units are Sony’s operating segments or one level below the operating segments. The identification of reporting units is dependent on the level at which discrete financial information is available and regularly reviewed by the segment manager. Under IFRS, goodwill is tested for impairment at the level of the CGU or group of CGUs, which represent the lowest level at which goodwill is monitored for internal management purposes, which may be a lower level of grouping than a reporting unit under U.S. GAAP. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.
Upon the transition to IFRS, Sony assessed its reporting units to determine if such reporting units should be further divided into several CGUs under IFRS. As a result, Sony determined that certain CGUs should be grouped at a lower level than a reporting unit under U.S. GAAP. In addition, Sony performed an impairment test for goodwill at the date of transition to IFRS regardless of whether there were any indications that the goodwill may be impaired based on conditions at the date of transition to IFRS. In performing the impairment test, Sony used the goodwill balance under U.S. GAAP attributed to each CGU or group of CGUs based on the history of acquisitions of the businesses. Under U.S. GAAP, when a business within a reporting unit was disposed of (including when classified as held for sale), goodwill was allocated to the remaining business and the disposed business based on relative fair value, and only the goodwill allocated to the disposed business was written off. Under IFRS, since certain disposed businesses represented individual CGUs or a group of CGUs, at the time of disposition, all the goodwill that was recognized for such businesses would have been written off. The assessment resulted in impairments related to CGUs or groups of CGUs of businesses that Sony disposed of prior to the date of transition to IFRS. In addition, the assessment resulted in impairments related to CGUs or groups of CGUs of businesses that existed at the date of transition to IFRS where the recoverable amount was lower than the carrying amount.
As a result, at the date of transition to IFRS, goodwill decreased by 96,817 million yen, and retained earnings decreased by the same amount. The impact of this change was primarily in the I&SS and Pictures segments and is discussed below.
In the I&SS segment, at the date of transition to IFRS, Sony recognized 43,376 million yen of impairment losses in retained earnings, which includes the impairment loss related to the goodwill allocated to CGUs or groups of CGUs of businesses that Sony disposed of prior to the date of transition to IFRS as well as the Internet of Things (“IoT”)-related business, which existed at the date of transition to IFRS. The recoverable amount of theIoT-related
business was determined by the value in use and apre-tax
discount rate of 9.8% was used in the measurement.In the Pictures segment, at the date of transition to IFRS, Sony recognized 48,749 million yen of impairment losses in retained earnings, which includes the impairment loss related to the goodwill allocated to CGUs or groups of CGUs of businesses that Sony disposed of prior to the date of transition to IFRS as well as the United States television network CGU, which existed at the date of transition to IFRS. The recoverable amount of the United States television network CGU was determined by the value in use and apre-tax
discount rate of 15.9% was used in the measurement.The impact of this change is as follows:
| | | | | | | | | | | | | | | | | | | | (Consolidated Statements of Financial Position) | | | | | | | | | | | | (96,817 | ) | | | (100,727 | ) | Accumulated other comprehensive income | | | — | | | | 2,942 | | | | | | | | | | | Adjustment to retained earnings | | | (96,817 | ) | | | (97,785 | ) | | | | | | | | | | | | | | | | | | | | | |
| | (Consolidated Statements of Income) | | | | | Other operating (income) expense, net | | | (968 | ) | | | | | | Increase (decrease) in adjustment to income before income taxes | | | (968 | ) | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
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Setting of parameters for repurchase of shares of its own common stock Sony Group Corporation approved the setting of the following parameters for repurchas e of its own common stock pursuant to the Companies Act of Japan and Sony Group Corporation’s Articles of Incorporation by the resolution of its Board of Directors as of May 17, 2023: D. Equity instruments and debt instruments
Under U.S. GAAP, equity securities are recognized at fair value and subsequent changes in fair value are recognized in profit or loss. Equity securities that do not have readily determinable fair values are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Additionally, under U.S. GAAP, debt securities that areprimarily in the life insurance business, are carried at amortized cost.Under IFRS, equity instruments are recognized at fair value and subsequent changes in fair value are recognized in profit or loss. However, for investments in equity instruments which are not held for trading, Sony may make an irrevocable election at initial recognition to present subsequent changes in fair value of the investments in other comprehensive income. Such financial assets are measured at fair value and subsequent changes in the fair value are recognized in other comprehensive income.
Additionally, under IFRS, debt instruments, which are primarily in the life insurance business, are classified as financial assets measured at fair value through other comprehensive income if the debt instruments are held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Changes in the fair value of the financial assets after initial recognition, except for impairment gains or losses and foreign exchange gains or losses, are recognized in other comprehensive income.
The impact of this change before considering the tax effect is as follows:
| | | | | | | | | | | | | | | | | | | | (Consolidated Statements of Financial Position) | | | | | | | | | Other financial assets (non-current) | | | 22,110 | | | | 31,627 | | Investments and advances in the Financial Services segment (non-current) | | | 2,439,946 | | | | 1,649,660 | | | | | | | | | | | Accumulated other comprehensive income | | | (2,424,510 | ) | | | (1,840,980 | ) | | | | | | | | | | Adjustment to retained earnings | | | 37,546 | | | | (159,693 | ) | | | | | | | | | | | | | | | | | | | | | |
| | (Consolidated Statements of Income) | | | | | Financial services revenue | | | (12,547 | ) | Financial services expenses | | | (854 | ) | Share of profit (loss) of investments accounted for using the equity method | | | (30 | ) | | | | (178,677 | ) | | | | | | Increase (decrease) in adjustment to income before income taxes | | | (192,108 | ) | | | | | |
E. Insurance-related accounts
In accordance with Sony’s first-time adoption of IFRS 4 at the date of transition to IFRS, insurance contracts are recognized and measured based on the same accounting principles previously applied under U.S. GAAP. Under IFRS, the amount of insurance-related accounts was affected by shadow accounting in the life insurance business as a result of the increase in financial instruments to be measured at fair value through other comprehensive income. This change is mainly because the shadow liability adequacy test indicated that the insurance liabilities were not recorded at a sufficient level at the date of transition to IFRS.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
The impact of this change before considering the tax effect is as follows:
| | | | | | | | | | | | | | | | | | | | (Consolidated Statements of Financial Position) | | | | | | | | | Deferred insurance acquisition costs | | | (412,997 | ) | | | (33,434 | ) | Future insurance policy benefits and other | | | (273,530 | ) | | | (14,609 | ) | Policyholders’ account in the life insurance business | | | 2,261 | | | | 2,170 | | Accumulated other comprehensive income | | | 684,266 | | | | 45,873 | | | | | | | | | | |
F. Impact of changes in the measurement method of debt instruments in the life insurance business on deferred tax liabilities and noncontrolling interests
In connection with “D. Equity instruments and debt instruments” and “E. Insurance-related accounts,” accumulated other comprehensive income is affected due to the change in the measurement method of debt instruments in the life insurance business and the change in the amount of insurance-related accounts as a result of the application of shadow accounting.
The impact of this change on deferred tax liabilities and noncontrolling interests is as follows:
| | | | | | | | | | | | | | | | | | | | (Consolidated Statements of Financial Position) | | | | | | | | | | | | (489,839 | ) | | | (452,189 | ) | | | | (440,099 | ) | | | — | | Accumulated other comprehensive income | | | 929,938 | | | | 452,189 | | | | | | | | | | |
The main items causing the differences in retained earnings are as follows:
| | | | | | | | | | | | | | | | | | | | Retained earnings under U.S. GAAP | | | 2,765,187 | | | | 3,857,152 | | | | | | | | | | | 1 Exchange differences on translating foreign operations *A | | | (509,872 | ) | | | (510,091 | ) | 2 Post-employment benefits *B | | | (317,184 | ) | | | (294,524 | ) | 3 Impairment of goodwill *C | | | (96,817 | ) | | | (97,785 | ) | 4 Equity instruments and debt instruments *D | | | 37,546 | | | | (159,693 | ) | | | | 6,616 | | | | 13,249 | | Tax effect of adjustments | | | 64,221 | | | | 106,195 | | | | | | | | | | | | | | (815,490 | ) | | | (942,649 | ) | | | | | | | | | | Retained earnings under IFRS | | | 1,949,697 | | | | 2,914,503 | | | | | | | | | | |
H. Income before income taxes
The main items causing the differences in income before income taxes are as follows:
| | | | | | | | | | | | | | | 1. | Fiscal year ended March 31, 2021
| | | | Income before income taxes under U.S. GAAP
| | | 1,192,370 | | | | | | | 1 Post-employment benefits *B
| | | 7,039 | | 2 Impairment of goodwill *C
| | | (968 | ) | 3 Equity instruments and debt instruments *D
| | | (192,108 | ) | | | | (8,368 | ) | | | | | | | | | (194,405 | ) | | | | | | Income before income taxes under IFRS
| | | 997,965 | | | | | | |
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Due to the adoption of IFRS, income taxes have been adjusted by recording the tax effects on various IFRS adjustments recognized and measured, and other IFRS tax effects.
(5) Reconciliation of consolidated statements of cash flows
The main items causing the differences in the consolidated statements of cash flows are as follows:
| | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2021 | | | | Cash flows from operating activities | | | Cash flows from investing activities | | | Cash flows from financing activities | | Consolidated statements of cash flows under U.S. GAAP | | | 1,350,150 | | | | (1,781,516 | ) | | | 666,967 | | | | | | | | | | | | | | | 1. Principal payments for operating lease liabilities *1 | | | 72,098 | | | | — | | | | (72,098 | ) | 2. Additions and disposals of content assets *2 | | | (34,751 | ) | | | 34,751 | | | | — | | 3. Changes in assets and liabilities in the Financial Services segment *3 | | | | | | | | | | | | | (1) Investments and advances in the Financial Services segment | | | (1,181,744 | ) | | | 1,181,744 | | | | — | | (2) Deposits from customers in the banking business | | | 332,987 | | | | — | | | | (332,987 | ) | (3) Borrowings in the life insurance business and the banking business | | | 463,783 | | | | — | | | | (463,783 | ) | (4) Future insurance policy benefits and other and policyholders’ account in the life insurance business | | | 134,299 | | | | — | | | | (134,299 | ) | | | | 3,395 | | | | 1,111 | | | | (2,333 | ) | | | | | | | | | | | | | | | | | (209,933 | ) | | | 1,217,606 | | | | (1,005,500 | ) | | | | | | | | | | | | | | Consolidated statements of cash flows under IFRS | | | 1,140,217 | | | | (563,910 | ) | | | (338,533 | ) | | | | | | | | | | | | | |
*1 | P
rincipal payments for operating lease liabilities |
Under U.S. GAAP, lessees classify leases as either operating leases or finance leases, and the principal payments for the operating lease liabilities are classified as cash flows from operating activities in the consolidated statements of cash flows. Under IFRS, the distinction between operating leases and finance leases no longer exists for lessees, and all of the principal payments for lease liabilities are classified as cash flows from financing activities in the consolidated statements of cash flows.
*2 | Additions
and disposals of content assets |
Under U.S. GAAP, Sony classified the cash flows from the additions and disposals of film costs as cash flows from operating activities, and classified the cash flows from the additions and disposals of music catalogs, artist contracts, music distribution rights and other content assets as cash flows from investing activities in the consolidated statements of cash flows based on the nature of such transactions as additions and disposals of intangible assets. Under IFRS, Sony defines these intangible assets as content assets, and classifies the cash flows from the additions and disposals of content assets as cash flows from operating activities in the consolidated statements of cash flows except for additions and disposals of content assets from business combinations or business divestitures, because the additions and disposals of content assets are derived from the principal revenue-producing activities of Sony.
*3 | Changes in assets and liabilities in the Financial Services segment
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Under U.S. GAAP, Sony classified cash flows from changes in investments and advances in the Financial Services segment and repurchase agreements in the Financial Services segment, deposits from customers in the banking business and policyholders’ account in the life insurance business according to the nature of these transactions in the consolidated statements of cash flows. Under IFRS, Sony classifies cash flows from these transactions as cash flows from operating activities in the consolidated statements of cash flows as these transactions are viewed as integral to the principal revenue-producing activities of Sony.
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Setting of parameters for repurchase of shares of its own common stock
Sony Group Corporation approved the setting of the following parameters for repurchase of its own common stock pursuant to the Companies Act of Japan and Sony Group Corporation’s Articles of Incorporation at the meeting of its Board of Directors held on May 10, 2022:
1. Total number of shares for repurchase: 25 million shares (maximum)
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| 2. | 2. Total purchase price for repurchase of shares: 200 billion yen (maximum) |
| 3. | 3. Period of repurchase: May 11, 202218, 2023 to May 10, 202317, 2024 |
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