| Financial Instruments | Financial Instruments Takeda promotes risk management to reduce the financial risks arising from business operations. The principal risks to which Takeda is exposed include market risk, counterparty credit risk, and liquidity risk caused by changes in the market environment such as fluctuations in foreign exchange rates, interest rates and market prices of commodities and other financial holdings. Each of these risks is managed in accordance with Takeda’s policies. Financial Assets and Liabilities JPY (millions) As of March 31, 2023 Financial assets measured at amortized Measured at fair value through other comprehensive income Measured at fair value through profit or loss Derivative hedging instruments Other financial liabilities Total Financial assets measured at fair value Other financial assets - Equity instruments ¥ — ¥ 157,731 ¥ — ¥ — ¥ — ¥ 157,731 Derivative financial instruments — — 17,131 62,522 — 79,654 Investments in convertible notes — — 11,435 — — 11,435 Investments in debt instruments — — 1,063 — — 1,063 Financial assets associated with contingent consideration arrangements — — 23,806 — — 23,806 Trade and other receivables — 71,080 — — — 71,080 Total ¥ — ¥ 228,811 ¥ 53,435 ¥ 62,522 ¥ — ¥ 344,769 Financial assets not measured at fair value Other financial assets - Other ¥ 26,168 ¥ — ¥ — ¥ — ¥ — ¥ 26,168 Trade and other receivables 578,349 — — — — 578,349 Cash and cash equivalents 533,530 — — — — 533,530 Total ¥ 1,138,047 ¥ — ¥ — ¥ — ¥ — ¥ 1,138,047 Financial liabilities measured at fair value Other financial liabilities - Derivative financial instruments ¥ — ¥ — ¥ 15,261 ¥ 25,460 ¥ — ¥ 40,721 Financial liabilities associated with contingent consideration arrangements — — 8,139 — — 8,139 Total ¥ — ¥ — ¥ 23,400 ¥ 25,460 ¥ — ¥ 48,860 Financial liabilities not measured at fair value Other financial liabilities - Lease liabilities ¥ — ¥ — ¥ — ¥ — ¥ 479,351 ¥ 479,351 Other — — — — 191,595 191,595 Trade and other payables — — — — 649,233 649,233 Bonds and loans — — — — 4,382,341 4,382,341 Total ¥ — ¥ — ¥ — ¥ — ¥ 5,702,520 ¥ 5,702,520 JPY (millions) As of March 31, 2024 Financial assets measured at amortized Measured at fair value through other comprehensive income Measured at fair value through profit or loss Derivative hedging instruments Other financial liabilities Total Financial assets measured at fair value Other financial assets - Equity instruments ¥ — ¥ 182,887 ¥ — ¥ — ¥ — ¥ 182,887 Derivative financial instruments — — 17,617 102,606 — 120,223 Investments in convertible notes — — 13,459 — — 13,459 Investments in debt instruments — — 1,113 — — 1,113 Financial assets associated with contingent consideration arrangements — — 12,293 — — 12,293 Trade and other receivables — 83,734 — — — 83,734 Total ¥ — ¥ 266,621 ¥ 44,482 ¥ 102,606 ¥ — ¥ 413,709 Financial assets not measured at fair value Other financial assets - Other ¥ 25,892 ¥ — ¥ — ¥ — ¥ — ¥ 25,892 Trade and other receivables 584,669 — — — — 584,669 Cash and cash equivalents 457,800 — — — — 457,800 Total ¥ 1,068,361 ¥ — ¥ — ¥ — ¥ — ¥ 1,068,361 Financial liabilities measured at fair value Other financial liabilities - Derivative financial instruments ¥ — ¥ — ¥ 13,783 ¥ 11,325 ¥ — ¥ 25,108 Financial liabilities associated with contingent consideration arrangements — — 7,772 — — 7,772 Other — — 1,797 — — 1,797 Total ¥ — ¥ — ¥ 23,352 ¥ 11,325 ¥ — ¥ 34,677 Financial liabilities not measured at fair value Other financial liabilities - Lease liabilities ¥ — ¥ — ¥ — ¥ — ¥ 619,639 ¥ 619,639 Other — — — — 176,938 176,938 Trade and other payables — — — — 547,521 547,521 Bonds and loans — — — — 4,843,752 4,843,752 Total ¥ — ¥ — ¥ — ¥ — ¥ 6,187,850 ¥ 6,187,850 Fair Value Measurement Derivative and non-derivative financial instruments measured at fair value are categorized in the following three-tier fair value hierarchy that reflects the significance of the inputs in making the measurements. Level 1 is defined as observable inputs, such as quoted prices in active markets for an identical asset or liability. Level 2 is defined as inputs other than quoted prices in active markets within Level 1 that are directly or indirectly observable. Level 3 is defined as unobservable inputs. JPY (millions) As of March 31, 2023 Level 1 Level 2 Level 3 Total Assets: Financial assets measured at fair value through profit or loss Derivatives ¥ — ¥ 10,542 ¥ 6,589 ¥ 17,131 Investment in convertible notes — — 11,435 11,435 Investment in debt instruments — — 1,063 1,063 Financial assets associated with contingent consideration arrangements — — 23,806 23,806 Derivatives for which hedge accounting is applied — 62,522 — 62,522 Financial assets measured at fair value through OCI Trade and other receivables — 71,080 — 71,080 Equity instruments 74,495 — 83,236 157,731 Total ¥ 74,495 ¥ 144,144 ¥ 126,129 ¥ 344,769 Liabilities: Financial liabilities measured at fair value through profit or loss Derivatives ¥ — ¥ 8,672 ¥ 6,589 ¥ 15,261 Financial liabilities associated with contingent consideration arrangements — — 8,139 8,139 Derivatives for which hedge accounting is applied — 25,460 — 25,460 Total ¥ — ¥ 34,131 ¥ 14,728 ¥ 48,860 JPY (millions) As of March 31, 2024 Level 1 Level 2 Level 3 Total Assets: Financial assets measured at fair value through profit or loss Derivatives ¥ — ¥ 8,511 ¥ 9,106 ¥ 17,617 Investment in convertible notes — — 13,459 13,459 Investment in debt instruments — — 1,113 1,113 Financial assets associated with contingent consideration arrangements — — 12,293 12,293 Derivatives for which hedge accounting is applied — 102,606 — 102,606 Financial assets measured at fair value through OCI Trade and other receivables — 83,734 — 83,734 Equity instruments 93,962 — 88,925 182,887 Total ¥ 93,962 ¥ 194,851 ¥ 124,896 ¥ 413,709 Liabilities: Financial liabilities measured at fair value through profit or loss Derivatives ¥ — ¥ 4,677 ¥ 9,106 ¥ 13,783 Financial liabilities associated with contingent consideration arrangements — — 7,772 7,772 Other — — 1,797 1,797 Derivatives for which hedge accounting is applied — 11,325 — 11,325 Total ¥ — ¥ 16,002 ¥ 18,675 ¥ 34,677 Valuation Techniques The fair value of derivatives classified as Level 2 is measured based on Treasury management system valuation models or the Black-Scholes model, whose significant inputs are based on observable market data. Derivatives classified as Level 3 include those recognized in connection with settlements of cash flows arising from differences between the fixed prices and floating market prices of renewable energy in a virtual power purchase agreement and those recognized in an agreement to offset the volatility of such cash flows. The fair value of derivatives in Level 3 is measured using the discounted cash flow method. The key assumptions taken into account include forecasted renewable energy prices and the expected generation of the renewable energy generating facility. The fair value of the investment in convertible notes is measured using techniques such as the discounted cash flow and option pricing models. The fair value of trade and other receivables, which are due from customers that Takeda has the option to factor, are measured based on the invoiced amount. Equity investments and investments in debt instruments are not held for trading. If equity instruments or investments in debt instruments are quoted in an active market, the fair value is based on price quotations at the period-end-date. If equity instruments or investments in debt instruments are not quoted in an active market, the fair value is calculated utilizing an adjusted book value per share method or EBITDA multiples approach based on available information as of each period-end-date and comparable companies. The principal input that is not observable and utilized for the calculation of the fair value of equity instruments and investments in debt instruments classified as Level 3 is the EBITDA rate used for the EBITDA multiples approach, which ranges from 5.2 times to 13.0 times. During the years ended March 31, 2023 and 2024, cumulative gains or losses on equity investments of JPY 6,935 million and JPY (1,224) million were reclassified from other comprehensive income to retained earnings, respectively, upon the disposal of certain equity investments in publicly traded companies. The fair value of these investments on the dates of disposal during the years ended March 31, 2023 and 2024 were JPY 21,800 million and JPY 6,458 million, respectively. The investments were disposed of after management’s assessment of these investments relative to the investment strategy. Financial assets and liabilities associated with contingent consideration arrangements are measured at fair value at the time of the divestiture or the acquisition date of business combination. When the contingent consideration arrangement meets the definition of a financial asset or liability, it is subsequently re-measured at fair value at each closing date. The determination of the fair value is based on models such as scenario-based methods and discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target, forecasted revenue projections, and the discount factor. The financial assets associated with contingent consideration arrangements are recognized mainly in relation to the divestiture of XIIDRA. The financial liabilities associated with contingent consideration arrangements are discussed in Financial liabilities associated with contingent consideration arrangements . The fair value of the other financial liabilities is measured using the discounted cash flow model. Transfers between levels Takeda recognizes transfers between levels of the fair value hierarchy, at the end of the reporting period during which the change has occurred. There were transfers from Level 3 to Level 1 recorded in the years ended March 31, 2023 and 2024. These transfers resulted from the investments in the companies whose shares were previously not listed on an equity or stock exchange and had no recent observable active trades in the shares. During the years ended March 31, 2023 and 2024, the companies listed its equity shares on an exchange and are currently actively traded in the market. As the equity shares have a published price quotation in an active market, the fair value measurement was transferred from Level 3 to Level 1 on the fair value hierarchy during the years ended March 31, 2023 and 2024, respectively. There were no other significant transfers between levels of the fair value hierarchy during the years ended March 31, 2023 and 2024. Level 3 financial assets fair values Takeda invests in equity instruments mainly for research collaboration. The following table shows a reconciliation from the opening balances to the closing balances for Level 3 financial asset fair values for the years ended March 31, 2023 and 2024. The disclosure related to Level 3 financial liabilities which are financial liabilities associated with contingent consideration arrangements are included in Financial liabilities associated with contingent consideration arrangements. There are no significant changes in fair value during the changes in certain assumptions which influence the fair value measurement for Level 3 financial assets. JPY (millions) 2023 2024 Financial assets associated with contingent consideration arrangements Equity instruments Financial assets associated with contingent consideration arrangements Equity instruments As of the beginning of the year ¥ 26,852 ¥ 64,263 ¥ 23,806 ¥ 83,236 Changes recognized as finance income (expenses) 1,905 — (702) — Changes in fair value of financial assets associated with contingent consideration due to other elements than time value (3,412) — (12,415) — Changes in fair value of financial assets measured at fair value through OCI and exchange differences on translation of foreign operations 2,182 8,244 1,604 4,900 Settled and received during the period (3,722) — — — Purchases — 8,527 — 1,760 Sales — (22) — (217) Transfers to Level 1 — (1,711) — (5,008) Acquisition from conversion of convertible notes — 1,368 — 4,254 Transfers from investments accounted for using the equity method — 3,404 — — Transfers to investments accounted for using the equity method — (837) — — As of the end of the year ¥ 23,806 ¥ 83,236 ¥ 12,293 ¥ 88,925 Financial liabilities associated with contingent consideration arrangements Financial liabilities associated with contingent consideration arrangements represent consideration related to business combinations or license agreements that are payable only upon future events such as the achievement of development milestones and sales targets, including pre-existing contingent consideration arrangements of the companies that are acquired by Takeda. At each reporting date, the fair value of financial liabilities associated with contingent consideration arrangements is re-measured based on risk-adjusted future cash flows discounted using an appropriate discount rate. As of March 31, 2023 and 2024, the balance primarily relates to pre-existing contingent consideration arrangements from historical acquisitions. The fair value of financial liabilities associated with contingent consideration arrangements could increase or decrease due to changes in certain assumptions which underpin the fair value measurements. The assumptions include probability of milestones being achieved. The fair value of financial liabilities associated with contingent consideration arrangements are classified as Level 3 in the fair value hierarchy. The following table shows a reconciliation from the opening balances to the closing balances and payment term for financial liabilities associated with contingent consideration arrangements for the years ended March 31, 2023 and 2024, respectively. There are no significant changes in fair value during the changes in significant assumptions which influence the fair value measurement for financial liabilities associated with contingent consideration arrangements. JPY (millions) 2023 2024 As of the beginning of the year ¥ 5,844 ¥ 8,139 Changes in the fair value during the period 2,605 8,678 Settled and paid during the period (728) (9,032) Foreign currency translation differences 418 (13) As of the end of the year ¥ 8,139 ¥ 7,772 JPY (millions) 2023 2024 Payment term (undiscounted) Within one year ¥ 918 ¥ 2,207 Between one and three years 4,537 3,698 Between three and five years 2,980 1,855 More than five years 1,031 1,171 Financial instruments not measured at fair value The carrying amount and fair value of financial instruments that are not measured at fair value in the consolidated statements of financial position are as follows. Fair value information is not provided for financial instruments, if the carrying amount is a reasonable estimate of fair value due to the relatively short period of maturity of these instruments. JPY (millions) 2023 2024 Carrying amount Fair value Carrying amount Fair value Bonds ¥ 3,618,314 ¥ 3,291,147 ¥ 3,775,879 ¥ 3,420,668 Long-term loans 723,772 721,419 750,622 746,831 Long-term financial liabilities are recognized at their carrying amount. The fair value of bonds is measured at quotes whose significant inputs to the valuation model used are based on observable market data. The fair value of loans is measured at the present value of future cash flows discounted using the applicable market rate on the loans in consideration of the credit risk by each group classified in a specified period. The fair value of bonds and long-term loans are classified as Level 2 in the fair value hierarchy. Market Risk Major market risks to which Takeda is exposed are 1) foreign currency risk, 2) interest rate risk and 3) price fluctuation risk. Financial instruments affected by market risk include loans and borrowings, deposits, equity investments and derivative financial instruments. Foreign Currency Risk Takeda’s exposure to foreign exchange rates primarily relates to its foreign currency denominated operations and Takeda’s net investments in foreign subsidiaries. Takeda manages foreign currency risks in a centralized manner using derivative financial instruments. Takeda’s policy does not permit the use of speculative foreign currency financial instruments or derivatives. Takeda uses forward exchange contracts, currency swaps, and currency options to hedge individually significant foreign currency transactions. Takeda has also designated loans and bonds denominated in the US dollar and Euro and certain forward exchange contracts as hedging instruments of net investments in foreign operations. As of March 31, 2023 and 2024, the total fair value of the foreign currency denominated loans was JPY 200,491 million and JPY 227,309 million, respectively, and the total fair value of the foreign currency denominated bonds was JPY 2,548,795 million and JPY 2,679,660 million, respectively. Takeda is exposed mainly to foreign currency risks of the US dollar and Euro. The fair values of Takeda’s financial instrument holdings are analyzed to determine their sensitivity to changes in foreign exchange rates. Our analysis shows that if the JPY were to change against all other currencies by 5%, as of March 31, 2023 and 2024, the hypothetical impact on net income would not be material. This analysis assumes that all other variables, in particular interest rates, remain constant and that a change in one currency’s rate relative to the JPY would not have any effect on another currency’s rate relative to the JPY. In addition, this analysis does not include the effects of foreign currency translation on financial instruments that are denominated in the functional currency of the entity holding them. JPY (millions) As of March 31, 2023 Contract amount Contract amount to be settled in more than one year Fair value Forward exchange contracts: Selling: Euro ¥ 975,368 ¥ — ¥ (4,799) United States Dollar 179,942 — (341) Buying: Euro 1,056,070 — 31 Currency swaps: Buying: United States Dollar 717,114 717,114 41,044 JPY (millions) As of March 31, 2024 Contract amount Contract amount to be settled in more than one year Fair value Forward exchange contracts: Selling: Euro ¥ 710,301 ¥ — ¥ (9,663) United States Dollar 170,364 — (2,618) Buying: Euro 336,271 — 6,268 Currency swaps: Buying: United States Dollar 874,974 874,974 95,368 The above currency swaps, designated as hedging instruments in a cash flow hedge, were related to foreign currency denominated bonds and loans. The cash flow hedge reserve related to the currency swaps were reclassified to profit or loss in the same period as the hedged expected future cash flows occur. Interest Rate Risk Takeda’s exposure to the risk of changes in benchmark interest rates and foreign exchange rate relates to the outstanding debts with floating interest rates as well as the trade and other receivables due from customers that Takeda has the option to factor. Takeda uses interest rate swaps, forward interest rate contracts, and cross currency interest rate swaps that fix the amount of future payments to manage interest and foreign exchange rate risks through cash flow hedge strategies. Takeda may also use derivatives that effectively convert its fixed rate debt to floating through fair-value hedge strategies. The following summarizes interest rate swaps, forward interest rate contracts, and cross currency interest rate swaps designated as cash flow hedges as of March 31: JPY (millions) As of March 31 Contract amount Contract amount to be settled in more than one year Fair value 2023 ¥ 1,098,862 ¥ 1,048,862 ¥ 44,042 2024 1,322,069 1,052,069 101,128 The fair values of Takeda’s financial instrument holdings are analyzed to determine their sensitivity to interest rate changes. Our analysis shows that if there were a 1% change in interest rates, as of March 31, 2023 and 2024, the hypothetical impact on net income would not be material. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant. Price Fluctuation Risk Management Commodity Price Risk For its business operations, Takeda is exposed to risks from commodity price fluctuations. Takeda manages this risk primarily by utilizing fixed price contracts but may also use financial instruments to lock in a fixed price. Market Price Risk Market pricing and valuations of Takeda’s fixed-income financial assets and liabilities are impacted by changes in currency rates, interest rates and credit spreads, which are managed as described above. For equity instruments, Takeda manages the risk of price fluctuations in the instruments by regularly reviewing share prices and financial positions of the issuers. Our analysis shows that if the market price of equity instruments held by Takeda and investments in trusts which hold equity instruments on behalf of Takeda had changed by 10%, as of March 31, 2023 and 2024, the hypothetical impact on other comprehensive income would not be material. This analysis assumes that all other variables, in particular interest rates and foreign currency exchange rates, remain constant. There is no impact on net income because the changes in the fair value of equity instruments are recognized directly in equity. Derivative Financial Instruments As described above, Takeda is exposed to effects related to foreign exchange fluctuations in connection with our international business activities that are denominated in various currencies and Takeda’s overseas entities that have different functional currencies. Takeda is also exposed to currency and interest rate fluctuations on our borrowings that we use to finance our business operations and our acquisitions. In addition, Takeda is exposed to interest rate fluctuations on the trade and other receivables due from customers that Takeda has the option to factor. These are denominated in various currencies and may bear interest at variable rates, resulting in the risk related to the currency and interest rate movements. In order to manage the risk of currency exchange rate and interest rate fluctuations, Takeda may enter into derivative contracts with highly rated financial institutions. Takeda enters into derivative contracts based on our risk management policies, which determine the authority for entering into such transactions and the transaction limits. The policy, which has been consistently followed, is that financial derivatives be used only for hedging foreign currency and interest rate exposure and not for speculative purposes. Takeda generally designates its derivatives as hedges for accounting purposes. In certain instances, Takeda enters into derivative contracts (“balance sheet hedges”) that do not qualify for hedge accounting but are nevertheless utilized to manage the underlying foreign currency exposure risk. Balance sheet hedges are used to offset the foreign currency impact from assets and liabilities on Takeda balance sheet that are denominated in non-functional currencies. Given these foreign currency derivatives work on an offset basis they do not require hedge accounting. Takeda has established guidelines for risk assessment procedures and controls for the use of financial instruments. These guidelines include a clear segregation of duties between execution and administration, and then again between accounting and controlling. Summary of Financial Position and Financial Performance for Derivative and Hedging Activities The following tables represent the items designated as hedging instruments, amounts within other components of equity related to items designated as hedged items and amounts of changes in fair value of hedging instruments recorded in other comprehensive income and the amounts reclassified from the hedging reserve to profit or loss as of and for the year ended March 31, 2023: JPY (millions) As of March 31, 2023 Notional Carrying amount – assets Carrying amount – liabilities Line item in the statement of financial position where hedging instrument is included Average rate used for the fair value of the hedging instrument Cash flow hedges Interest risk Interest rate swaps USD 575 million ¥ 5,148 ¥ — Other financial assets 2.83 % JPY 75,000 million — 50 Other financial liabilities 0.56 % Forward interest rate JPY 230,000 million — 2,100 Other financial liabilities 0.54 % Currency and interest risk Currency and interest rate swaps USD 6,675 million 55,223 14,179 Other financial assets /liabilities 107.43 JPY 1.85% Net investment hedges Foreign currency denominated bonds and loans USD 4,086 million — 545,327 Bonds and loans EUR 6,591 million — 957,993 Bonds and loans Forward exchange contracts USD 1,368 million 728 1,069 Other financial assets /liabilities EUR 4,384 million 1,424 8,062 Other financial assets /liabilities JPY (millions) As of March 31, 2023 Balance in cash flow hedges and net investment hedges Balance in hedge cost reserve Cash flow hedges Interest risk Interest rate swaps ¥ 2,948 ¥ — Forward interest rate (21,182) — Currency and interest risk Currency and interest rate swaps (72,678) (23,127) Currency risk Hedge related to acquisition 3,560 — Net investment hedges Foreign currency denominated bonds and loans 188,343 — Forward exchange contracts 80,584 — JPY (millions) For the year ended March 31, 2023 Amounts recognized in OCI Amount reclassified to profit or loss Change in fair value of hedging instruments Hedging costs Cash flow hedge Hedging costs Line item in which reclassification adjustment is included Cash flow hedges Interest risk Interest rate swaps ¥ 3,993 ¥ — ¥ (360) ¥ — Finance income Forward interest rate (2,123) — 2,312 — Finance expenses Currency and interest risk Currency and interest rate swaps 54,566 (21,426) (89,289) (3,052) Finance income and Finance expenses Net investment hedges Foreign currency denominated bonds and loans 142,456 — — — Forward exchange contracts 25,806 — — — The following tables represent the items designated as hedging instruments, amounts within other components of equity related to items designated as hedged items and amounts of changes in fair value of hedging instruments recorded in other comprehensive income and the amounts reclassified from the hedging reserve to profit or loss as of and for the year ended March 31, 2024: JPY (millions) As of March 31, 2024 Notional Carrying amount – assets Carrying amount – liabilities Line item in the statement of financial position where hedging instrument is included Average rate used for the fair value of the hedging instrument Cash flow hedges Interest risk Interest rate swaps USD 575 million ¥ 7,172 ¥ — Other financial assets 2.83 % JPY 90,000 million 33 0 Other financial assets /liabilities 0.57 % Forward interest rate JPY 270,000 million 34 1,477 Other financial assets /liabilities 0.53 % Currency and interest risk Currency and interest rate swaps USD 6,675 million 95,368 — Other financial assets 131.08 JPY (0.09)% Net investment hedges Foreign currency denominated bonds and loans USD 3,581 million — 542,399 Bonds and loans EUR 6,628 million — 1,081,796 Bonds and loans Forward exchange contracts USD 1,168 million — 2,618 Other financial liabilities EUR 1,000 million — 7,229 Other financial liabilities JPY (millions) As of March 31, 2024 Balance in cash flow hedges and net investment hedges Balance in hedge cost reserve Cash flow hedges Interest risk Interest rate swaps ¥ 4,063 ¥ — Forward interest rate (19,283) — Currency and interest risk Currency and interest rate swaps (52,236) (15,930) Currency risk Hedge related to acquisition 3,560 — Net investment hedges Foreign currency denominated bonds and loans 344,866 — Forward exchange contracts 189,796 — JPY (millions) For the year ended March 31, 2024 Amounts recognized in OCI Amount reclassified to profit or loss Change in fair value of hedging instruments Hedging costs Cash flow hedge Hedging costs Line item in which reclassification adjustment is included Cash flow hedges Interest risk Interest rate swaps ¥ 4,098 ¥ — ¥ (2,492) ¥ — Finance income Forward interest rate 387 — 2,349 — Finance expenses Currency and interest risk Currency and interest rate swaps 166,574 12,392 (137,122) (2,024) Finance income and Finance expenses Net investment hedges Foreign currency denominated bonds and loans 169,111 — — — Forward exchange contracts 109,212 — — — The amount relating to the ineffectiveness recorded in profit or loss was immaterial for the years ended March 31, 2023 and 2024. The amount of hedging gains/losses recorded in other comprehensive income and reclassified to profit or loss as hedged future cash flows were no longer expected to occur was not material for the years ended March 31, 2023 and 2024. Capital Management The capital structure of Takeda consists of shareholders’ equity (Note 26), bonds and loans (Note 20), and cash and cash equivalents (Note 18). The fundamental principles of Takeda’s capital risk management are to build and maintain a steady financial base for the purpose of maintaining soundness and efficiency of operations and achieving sustainable growth. According to these principles, Takeda conducts capital investment, profit distribution such as dividends, and repayment of loans based on steady operating cash flows through the development and sale of competitive products. Takeda utilizes factoring arrangements for selected trade receivables. Under these programs, trade receivables sold are derecognized when the risks and rewards of ownership have been transferred. Amounts due from customers that are subject to the factoring arrangements but have not been factored at fiscal year end are disclosed in Note 17. Takeda balances and monitors its capital structure between debt and equity and adheres to a conservative financial discipline. Credit Risk Takeda is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions, and other financial instruments. The maximum exposure to credit risk, without taking into account any collateral held at the end of the reporting period, is represented by the carrying amount of the financial instruments which is exposed to credit risk on the consolidated statements of financial position. Takeda regularly monitors the status of credit risk exposure with banks and financial institutions. Customer Credit Risk Trade and other receivables are exposed to customer credit risk. Takeda monitors the status of overdue balances, reviews outstanding balances for each customer and regularly examines the credibility of major customers in accordance with Takeda’s policies for credit management to facilitate the early evaluation and the reduction of potential credit risks. In parallel, Takeda utilizes programs to sell certain trade and other receivables due from certain customers to a select group of banks on a non-recourse basis which in turn minimizes the credit risk associated with such customers. If necessary, Takeda obtains rights to collateral or guarantees on the receivables. The following represents the carrying amount of the trade receivables categorized by due date and the analysis of impairment loss allowance as of March 31, 2023 and 2024: JPY (millions) except for percentage As of March 31, 2023 Amount past due Current Within 30 Over 30 days but within 60 days Over 60 days but within 90 days Over 90 days but within one year Over one Total Gross carrying amount ¥ 499,795 ¥ 23,676 ¥ 14,999 ¥ 8,975 ¥ 19,912 ¥ 15,430 ¥ 582,787 Impairment loss allowance (2,219) (66) (66) (33) (694) (4,278) (7,356) Net carrying amount 497,576 23,610 14,933 8,942 19,218 11,152 575,431 Weighted average loss rate (%) 0.4 % 0.3 % 0.4 % 0.4 % 3.5 % 27.7 % 1.3 % JPY (millions) except for percentage As of March 31, 2024 Amount past due Current Within 30 Over 30 days but within 60 days Over 60 days but within 90 days Over 90 days but within one year Over one Total Gross carrying amount ¥ 527,383 ¥ 34,960 ¥ 12,645 ¥ 3,956 ¥ 21,492 ¥ 20,379 ¥ 620,815 Impairment loss allowance (2,482) (107) (143) (99) (450) (5,095) (8,376) Net carrying amount 524,901 34,853 12,502 3,857 21,042 15,284 612,439 Weighted average loss rate (%) 0.5 % 0.3 % 1.1 % 2.5 % 2.1 % 25.0 % 1.3 % Management believes that the unimpaired amounts that are past due are still collectible in full, based on historical payment behavior and extensive analysis of customer credit risk. As of March 31, 2023 and 2024, Takeda has provided loss allowance on trade receivables and other receivables not past due based on an analysis of credit histories. Loss allowance for trade receivables are measured based on expected credit losses on a coll |
