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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August 2021
Commission File Number: 001-06439
SONY GROUP CORPORATION
(Translation of registrant’s name into English)
1-7-1 KONAN, MINATO-KU, TOKYO, 108-0075, JAPAN
(Address of principal executive offices)
The registrant files annual reports under cover of Form 20-F.
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F,
Form 20-F X | Form 40-F |
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, Yes No X
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SONY GROUP CORPORATION | ||
(Registrant) | ||
By: | /s/ Hiroki Totoki | |
(Signature) | ||
Hiroki Totoki | ||
Executive Deputy President and | ||
Chief Financial Officer |
Date: August 12, 2021
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Quarterly Securities Report
For the three months ended June 30, 2021
(TRANSLATION)
Sony Group Corporation
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Note for readers of this English translation
On August 12, 2021, Sony Group Corporation (the “Company” or “Sony Group Corporation” and together with its consolidated subsidiaries, “Sony” or “Sony Group”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended June 30, 2021 with the Director-General of the Kanto Local Finance Bureau in Japan pursuant to the Financial Instruments and Exchange Act of Japan. This document is an English translation of the Quarterly Securities Report in its entirety, and is not intended to update the information that had been previously filed with or submitted to the U.S. Securities and Exchange Commission (the “SEC”) in a Form 20-F, Form 6-K or any other form.
Statements made in this Report with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could,” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Please note that Sony has disclosed the consolidated financial statements and its forecast for consolidated results for the fiscal year ending March 31, 2022 based on International Financial Reporting Standards (IFRS). Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to:
(i) | Sony’s ability to maintain product quality and customer satisfaction with its products and services; |
(ii) | Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including image sensors, game and network platforms, smartphones and televisions, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing customer preferences; |
(iii) | Sony’s ability to implement successful hardware, software, and content integration strategies, and to develop and implement successful sales and distribution strategies in light of new technologies and distribution platforms; |
(iv) | the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures, investments, capital expenditures, restructurings and other strategic initiatives; |
(v) | changes in laws, regulations and government policies in the markets in which Sony and its third-party suppliers, service providers and business partners operate, including those related to taxation, as well as growing consumer focus on corporate social responsibility; |
(vi) | Sony’s continued ability to identify the products, services and market trends with significant growth potential, to devote sufficient resources to research and development, to prioritize investments and capital expenditures correctly and to recoup its investments and capital expenditures, including those required for technology development and product capacity; |
(vii) | Sony’s reliance on external business partners, including for the procurement of parts, components, software and network services for its products or services, the manufacturing, marketing and distribution of its products, and its other business operations; |
(viii) | the global economic and political environment in which Sony operates and the economic and political conditions in Sony’s markets, particularly levels of consumer spending; |
(ix) | Sony’s ability to meet operational and liquidity needs as a result of significant volatility and disruption in the global financial markets or a ratings downgrade; |
(x) | Sony’s ability to forecast demands, manage timely procurement and control inventories; |
(xi) | foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in which Sony’s assets, liabilities and operating results are denominated; |
(xii) | Sony’s ability to recruit, retain and maintain productive relations with highly skilled personnel; |
(xiii) | Sony’s ability to prevent unauthorized use or theft of intellectual property rights, to obtain or renew licenses relating to intellectual property rights and to defend itself against claims that its products or services infringe the intellectual property rights owned by others; |
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(xiv) | the impact of changes in interest rates and unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment; |
(xv) | shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment; |
(xvi) | risks related to catastrophic disasters, pandemic disease or similar events; |
(xvii) | the ability of Sony, its third-party service providers or business partners to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sony’s business information and the personally identifiable information of its employees and customers, potential business disruptions or financial losses; and |
(xviii) | the outcome of pending and/or future legal and/or regulatory proceedings. |
Risks and uncertainties also include the impact of any future events with material adverse impact. The continued impact of the Coronavirus Disease 2019 (“COVID-19”) could heighten many of the risks and uncertainties noted above. Important information regarding risks and uncertainties is also set forth in Sony’s most recent Form 20-F, which is on file with the SEC.
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(1) Selected Consolidated Financial Data
Yen in millions, Yen per share amounts | ||||||||||||
Three months ended June 30, 2020 | Three months ended June 30, 2021 | Fiscal year ended March 31, 2021 | ||||||||||
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Sales and financial services revenue | 1,962,949 | 2,256,843 | 8,998,661 | |||||||||
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Operating income | 221,725 | 280,068 | 955,255 | |||||||||
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Income before income taxes | 268,562 | 283,210 | 997,965 | |||||||||
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Net income attributable to Sony Group Corporation’s stockholders | 193,583 | 211,829 | 1,029,610 | |||||||||
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Comprehensive income attributable to Sony Group Corporation’s stockholders | 190,143 | 278,349 | 1,118,628 | |||||||||
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Equity attributable to Sony Group Corporation’s stockholders | 5,042,241 | 6,903,196 | 6,680,343 | |||||||||
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Total assets | 25,233,481 | 28,269,689 | 27,507,843 | |||||||||
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Net income attributable to Sony Group Corporation’s stockholders per share of common stock, basic (yen) | 158.59 | 170.95 | 836.75 | |||||||||
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Net income attributable to Sony Group Corporation’s stockholders per share of common stock, diluted (yen) | 155.27 | 169.22 | 823.77 | |||||||||
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Ratio of stockholders’ equity to total assets at end of the period (%) | 20.0 | 24.4 | 24.3 | |||||||||
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Net cash provided by operating activities | 162,765 | 198,734 | 1,140,217 | |||||||||
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Net cash used in investing activities | (152,365) | (191,237) | (563,910) | |||||||||
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Net cash used in financing activities | (67,518) | (67,442) | (338,533) | |||||||||
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Cash and cash equivalents at end of the period | 1,448,909 | 1,725,218 | 1,786,982 | |||||||||
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Notes:
1. | The Company’s condensed consolidated financial statements are prepared in conformity with International Financial Reporting Standards (“IFRS”). |
2. | The Company reports the share of profit (loss) of investments accounted for using the equity method as a component of operating income. |
3. | Consumption taxes are not included in sales and financial services revenue. |
4. | Ratio of stockholders’ equity to total assets is calculated by using equity attributable to the stockholders of the Company. |
5. | The Company prepares condensed consolidated financial statements. Therefore parent-only selected financial data is not presented. |
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There was no significant change in the business of Sony during the three months ended June 30, 2021.
As of June 30, 2021, the Company had 1,503 subsidiaries and 152 affiliated companies, of which 1,468 companies are consolidated subsidiaries (including structured entities) of the Company. The Company has applied the equity accounting method for 136 associates and joint ventures.
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Note for readers of this English translation:
Except for the revised risk factor below, there was no significant change from the information presented in the Risk Factors section of the Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) on June 22, 2021. The revised risk factor below replaces the corresponding risk factor in the Form 20-F in its entirety. Any forward-looking statements included in the descriptions below are based on management’s current judgment.
URL: The Annual Report on Form 20-F filed with the SEC on June 22, 2021
https://www.sec.gov/Archives/edgar/data/313838/000119312521195631/d151790d20f.htm
Sony’s strategic initiatives, including acquisitions, joint ventures, investments, capital expenditures and restructurings, may not be successful in achieving their strategic objectives.
Sony actively engages in acquisitions, joint ventures, capital expenditures and other strategic investments to acquire new technologies, efficiently develop new businesses and enhance its business competitiveness. For example, in September 2020, in order to achieve further growth and strengthen governance within the financial services business with the goal of enhancing the corporate value of the entire Sony Group, Sony acquired all of the common shares and related stock acquisition rights of Sony Financial Holdings, Inc. (“SFH”) not held by Sony and made SFH a wholly-owned subsidiary of Sony, spending 396.7 billion yen. In addition, in the fiscal year ended March 31, 2021, Sony invested in Bilibili Inc. (“Bilibili”) and Epic Games, Inc. (“Epic Games”), and acquired minority interests in both companies, with the goal of accelerating business expansion in the area of entertainment. In the fiscal year ending March 31, 2022, Sony acquired 100% of the shares and related assets of certain subsidiaries of Kobalt Music Group Limited (“Kobalt”), relating to AWAL, Kobalt’s music distribution business mainly for independent recording artists, and Kobalt Neighbouring Rights, Kobalt’s music neighboring rights management business. The consideration for this acquisition was 49.8 billion yen. Prior to the closing of the acquisition, the U.K. Competition and Markets Authority (“CMA”) initiated a review of the transaction, and Sony continues to cooperate with such review. In addition, Sony made an additional strategic investment in Epic Games in the fiscal year ending March 31, 2022.
When making acquisitions, Sony’s financial results may be adversely affected by the significant cost of the acquisition and/or integration expenses, failure to achieve synergies, failure to generate expected revenue and cost improvements, loss of key personnel and assumption of liabilities.
When establishing joint ventures and strategic partnerships, Sony’s financial and operating results may be adversely affected by strategic or cultural differences with partners, conflicts of interest, failure to achieve synergies, additional funding or debt guarantees required to maintain the joint venture or partnership, requirements to buy out a joint venture partner, sell its shares or dissolve a partnership, insufficient management control including control over cash flow, loss of proprietary technology and know-how, impairment losses and reputational harm from the actions or activities of a joint venture that uses the Sony brand.
Sony invests heavily in production facilities and equipment, including fabrication facilities used to make image sensors for smartphones and other products. Sony may not be able to recover these capital expenditures in part or full or in the planned timeframe due to the competitive environment, lower-than-expected consumer demand or changes in the financial condition or business decisions of Sony’s major customers. Sony invested 265.7 billion yen and 180.0 billion yen of capital in the fiscal years ended March 31, 2020 and 2021, respectively, mainly for the purpose of increasing image sensor production capacity.
Further, Sony is implementing restructuring and transformation initiatives to enhance profitability, business autonomy and shareholder value and to clearly position each business within the overall business portfolio. However, the expected benefits of these initiatives, including the expected level of profitability, may not be realized due to internal and external impediments or market conditions worsening beyond expectations. If Sony is not successful in achieving its restructuring and transformation initiatives, Sony’s operating results, financial condition, reputation, competitiveness or profitability may be adversely affected. For example, in order to improve the profitability of its smartphone business in the Electronics Products & Solutions (“EP&S”) segment, Sony implemented restructuring initiatives through the fiscal year ended March 31, 2020, which included the cessation of production at its Beijing factory and the exit from several regions, such as the Middle East and Central and South America.
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(2) Management’s Discussion and Analysis of Financial Condition, Results of Operations and Status of Cash Flows
i) Results of Operations
Sony has adopted IFRS starting in the three months ended June 30, 2021 (“the current quarter”), in lieu of the previously applied generally accepted accounting principles in the United States (“U.S. GAAP”). The results for the three months ended June 30, 2020 and for the fiscal year ended March 31, 2021 are also presented in accordance with IFRS for the purpose of comparative analysis.
For details of adjustments made in accordance with the transition from U.S. GAAP to IFRS, please refer to “IV Financial Statements – Notes to Condensed Consolidated Financial Statements – 11. First-time adoption.”
Due to organizational changes as of April 1, 2021, from the current quarter, Sony transferred some of the businesses and functions previously included within All Other and Corporate and elimination to the EP&S segment. Sales and operating income (loss) of each segment for the fiscal year ended March 31, 2021 are presented to conform to the organizational structure for the fiscal year ending March 31, 2022.
All amounts are presented based on IFRS. “Sales and Financial Services revenue” (“sales”) in each business segment represents sales recorded before intersegment transactions are eliminated. “Operating income (loss)” in each business segment represents operating income (loss) reported before intersegment transactions are eliminated and excludes unallocated corporate expenses. For details regarding each segment’s product categories, please refer to “IV Financial Statements – Notes to Condensed Consolidated Financial Statements – 10. Business segment information.”
Consolidated Financial Results
(Billions of yen) | ||||||||
Three months ended June 30 | ||||||||
2020 | 2021 | |||||||
Sales | ¥ | 1,962.9 | ¥ | 2,256.8 | ||||
Operating income | 221.7 | 280.1 | ||||||
Income before income taxes | 268.6 | 283.2 | ||||||
Net income attributable to Sony Group Corporation’s stockholders | 193.6 | 211.8 |
Sales for the current quarter increased 293.9 billion yen compared to the same quarter of the previous fiscal year (“year-on-year”) to 2 trillion 256.8 billion yen. This significant increase was primarily due to significant increases in sales in the EP&S and Music segments.
Operating income in the current quarter increased 58.3 billion yen year-on-year to 280.1 billion yen. This significant increase was primarily due to a significant improvement in operating results in the EP&S segment, partially offset by a decrease in operating income in the Game & Network Services (“G&NS”) segment.
Operating income for the current quarter included the following:
• | One-time loss recorded at a subsidiary of Sony Life Insurance Co., Ltd. (“Sony Life”): 16.8 billion yen (Financial Services segment) |
• | Settlement gain in connection with the termination of the defined benefit pension plan at certain U.S. subsidiaries: 5.5 billion yen (mainly in Corporate and elimination) |
Operating income for the same quarter of the previous fiscal year included the following:
• | Gain on the sale of a portion of shares of Pledis Entertainment Co., Ltd. (“Pledis”): 7.2 billion yen (Music segment) |
• | Expenses related to the Sony Global Relief Fund for COVID-19: 3.3 billion yen (Corporate and elimination) |
The share of profit (loss) of investments accounted for using the equity method in the current quarter, recorded within operating income, was income of 4.3 billion yen, compared to a loss of 0.3 billion yen in the same quarter of the previous fiscal year. This improvement was mainly due to an increase in the share of profit of the investment in M3, Inc.
The net effect of financial income and expenses was income of 3.1 billion yen, a year-on-year decrease of 43.7 billion yen, mainly due to a decrease in unrealized gains on Sony’s shares of Spotify Technology S.A. For details, please refer to “IV Financial Statements – Notes to Condensed Consolidated Financial Statements – 4. Financial instruments.”
Income before income taxes increased 14.6 billion yen year-on-year to 283.2 billion yen.
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During the current quarter, Sony recorded 70.1 billion yen of income tax expense, resulting in an effective tax rate of 24.8%, which was higher than the effective tax rate of 24.0% in the same quarter of the previous fiscal year. This higher effective tax rate was primarily because, in the same quarter of the previous fiscal year, Sony did not record a tax expense for the use of certain temporary differences, operating loss carryforwards, and tax credit carryforwards, due to a significant portion of the deferred tax assets of the Japan consolidated tax filing group and the deferred tax assets for credits of the U.S. consolidated tax filing group staying unrecognized. The increase in the effective tax rate was partially offset by the fact that, in the current quarter, the amount of the income tax expense related to Japan controlled foreign company taxation was less than the same quarter of the previous fiscal year.
Net income attributable to Sony Group Corporation’s stockholders increased 18.2 billion yen year-on-year to 211.8 billion yen.
Operating performance by business segment for the current quarter is as follows:
Game & Network Services (G&NS)
Sales increased 9.7 billion yen year-on-year to 615.8 billion yen, mainly due to an increase in sales of hardware and peripheral devices as well as the impact of foreign exchange rates, partially offset primarily by a decrease in sales of non-first-party titles including add-on content. Operating income decreased 40.6 billion yen year-on-year to 83.3 billion yen. This significant decrease was primarily due to the impact of the above-mentioned decrease in sales of non-first-party titles, a deterioration in the operating results of hardware due to a loss resulting from strategic price points for PlayStation®5 hardware that were set lower than the manufacturing costs and a decrease in PlayStation®4 hardware unit sales, as well as an increase in selling, general and administrative expenses, partially offset by the positive impact of foreign exchange rates.
Music
The Music segment results include the yen-based results of Sony Music Entertainment (Japan) Inc. and the yen-translated results of Sony Music Entertainment (“SME”) and Sony Music Publishing LLC (“SMP”), which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis.
Sales increased 77.8 billion yen year-on-year to 254.9 billion yen. The significant increase in sales was due to increases in all categories. Sales for Recorded Music and Music Publishing increased primarily due to higher revenue from paid subscription streaming services as well as an increase in revenue from advertising-supported streaming services and physical media, which were impacted by COVID-19 in the same quarter of the previous fiscal year. In addition, Visual Media and Platform sales increased mainly due to an increase in sales in the anime business primarily reflecting the contribution of physical media revenue from Demon Slayer – Kimetsu no Yaiba – the Movie: Mugen Train. Operating income significantly increased 19.7 billion yen year-on-year to 55.4 billion yen, primarily due to the impact of the above-mentioned significant increase in sales, partially offset by the absence of a 7.2 billion yen gain recorded on the sale of a portion of shares of Pledis in the same quarter of the previous fiscal year.
Pictures
The Pictures segment results are the yen-translated results of Sony Pictures Entertainment Inc. (“SPE”), which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis. Management analyzes the results of SPE in U.S. dollars, so discussion of certain portions of its results is specified as being on “a U.S. dollar basis.”
Sales increased 29.6 billion yen, a 17% increase year-on-year (a 15% increase on a U.S. dollar basis), to 204.7 billion yen. The significant increase in sales was due to higher sales for Media Networks and Motion Pictures, partially offset by lower licensing revenues in Television Productions. Sales for Media Networks increased primarily due to higher advertising revenue in India resulting from a recovery of the advertising market and higher subscription revenues resulting from the growth of Funimation. The increase in sales for Motion Pictures was due to the higher television licensing revenues mainly from new film titles and catalog product. These favorable items were partially offset by lower home entertainment and television licensing revenues generated from prior year releases in the current quarter due to the absence of significant theatrical releases in the prior fiscal year as a result of COVID-19. Television Productions sales decreased primarily due to lower licensing revenues for U.S. television catalog product. Operating income decreased 1.7 billion yen year-on-year to 25.4 billion yen. This decrease was primarily due to the above-mentioned decrease in licensing revenue from U.S. television catalog product and an increase in production costs in Television Productions, partially offset by the increase in overall segment sales.
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Electronics Products & Solutions (EP&S)
Sales increased 214.9 billion yen year-on-year to 576.3 billion yen. This significant increase in sales was mainly due to an improvement in the product mix and increases in unit sales of televisions, digital cameras and Audio and Video. Operating income significantly improved 80.6 billion yen year-on-year to 71.8 billion yen, due to the impact of the above-mentioned increase in sales and the positive impact of foreign exchange rates.
Imaging & Sensing Solutions (I&SS)
Sales increased 11.9 billion yen year-on-year to 218.1 billion yen. This increase in sales was mainly due to an increase in sales of image sensors for digital cameras, resulting from an increase in unit sales due to a recovery from the impact of COVID-19. The increase in sales was partially offset by a decrease in sales of image sensors for mobile products due to a deterioration of the product mix, partially offset by an increase in unit sales. Operating income increased 4.3 billion yen year-on-year to 30.5 billion yen. This increase was mainly due to the impact of the above-mentioned increase in sales.
Financial Services
The Financial Services segment results include SFH and SFH’s consolidated subsidiaries such as Sony Life, Sony Assurance Inc. (“Sony Assurance”), and Sony Bank Inc. (“Sony Bank”). The results of Sony Life discussed in the Financial Services segment differ from the results that SFH and Sony Life disclose separately on a Japanese statutory basis.
Financial services revenue decreased 25.9 billion yen year-on-year to 414.4 billion yen, mainly due to decreases in revenue at Sony Life. Revenue at Sony Life decreased 17.0 billion yen year-on-year to 371.4 billion yen, mainly due to a decrease in net gains on investments in the separate accounts, partially offset by an increase in insurance premium revenue. Operating income significantly decreased 12.0 billion yen year-on-year to 24.0 billion yen, primarily due to the recording of one-time loss of 16.8 billion yen at a subsidiary of Sony Life due to an unauthorized withdrawal out of a bank account of the subsidiary and decreases in operating income at Sony Bank and Sony Assurance. Operating income at Sony Life increased 11.9 billion yen year-on-year to 35.1 billion yen, mainly due to a decrease in expenses for various provisions related to COVID-19, as well as a decrease in policy reserves due to a review of the basic rates associated with the integration of the annuity business. Operating income at Sony Bank decreased due to a deterioration in valuation gains and losses on securities and operating income at Sony Assurance decreased due to an increase in the loss ratio for automobile insurance.
Operating Performance by Geographic Area
For operating performance by geographic area, please refer to “sales and operating revenue attributed to countries and areas based on location of external customers” in “IV Financial Statements – Notes to Condensed Consolidated Financial Statements –10. Business segment information.”
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Foreign Exchange Fluctuations and Risk Hedging
Note for readers of this English translation:
Except for the information set forth below, there was no significant change from the information presented in the Foreign Exchange Fluctuations and Risk Hedging section of the Annual Report on Form 20-F filed with the SEC on June 22, 2021. Although foreign exchange rates have fluctuated during the three-month period ended June 30, 2021, there has been no significant change in Sony’s risk hedging policy as described in the Annual Report on Form 20-F.
URL: The Annual Report on Form 20-F filed with the SEC on June 22, 2021
https://www.sec.gov/Archives/edgar/data/313838/000119312521195631/d151790d20f.htm
During the current quarter, the average rates of the yen were 109.5 yen against the U.S. dollar and 131.9 yen against the euro, which were 1.9 yen and 13.4 yen lower year-on-year, respectively.
For the current quarter, sales were 2 trillion 256.8 billion yen, an increase of 15% year-on-year, while on a constant currency basis, sales increased approximately 12% year-on-year. For further details about the impact of foreign exchange rate fluctuations on sales and operating income, please refer to the Note below.
Consolidated operating income increased 58.3 billion yen year-on-year to 280.1 billion yen for the current quarter. Most of the foreign exchange rate impact was attributable to the impact of foreign exchange rates in the G&NS, EP&S and I&SS segments.
The table below indicates the impact of changes in foreign exchange rates on sales and operating results of each of the above-mentioned three segments. Also, please refer to the “Results of Operations” section, which discusses the impact of foreign exchange rates within segments and categories where foreign exchange rate fluctuations had a significant impact.
(Billions of yen) | ||||||||||||
Three months ended June 30 | Impact of changes in foreign exchange rates | |||||||||||
2020 | 2021 | |||||||||||
G&NS | Sales | ¥606.1 | ¥615.8 | +¥25.5 | ||||||||
Operating income | 123.9 | 83.3 | +9.7 | |||||||||
EP&S | Sales | 361.4 | 576.3 | +23.6 | ||||||||
Operating income (loss) | -8.9 | 71.8 | +13.2 | |||||||||
I&SS | Sales | 206.2 | 218.1 | +3.7 | ||||||||
Operating income | 26.2 | 30.5 | -2.0 |
In addition, sales for the Music segment increased 44% year-on-year to 254.9 billion yen, an approximate 42% increase on a constant currency basis. In the Pictures segment, sales increased 17% year-on-year to 204.7 billion yen, an approximate 15% increase on a U.S. dollar basis. As most of the operations in Sony’s Financial Services segment are based in Japan, Sony’s management analyzes the performance of the Financial Services segment on a yen basis only.
Note:
Sales on a Constant Currency Basis and the Impact of Foreign Exchange Rate Fluctuations
The descriptions of sales on a constant currency basis reflect sales calculated by applying the yen’s monthly average exchange rates from the same period of the previous fiscal year to local currency-denominated monthly sales in the relevant period of the current fiscal year. For SME and SMP in the Music segment, the constant currency amounts are calculated by applying the monthly average U.S. dollar / yen exchange rates after aggregation on a U.S. dollar basis.
Results for the Pictures segment are described on a U.S. dollar basis as the Pictures segment reflects the operations of SPE, a U.S.-based operation that aggregates the results of its worldwide subsidiaries in U.S. dollars.
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The impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s periodic weighted average exchange rate for the same period of the previous fiscal year from the relevant period of the current fiscal year to the major transactional currencies in which the sales are denominated. The impact of foreign exchange rate fluctuations on operating income (loss) is calculated by subtracting from the impact on sales the impact on cost of sales and selling, general and administrative expenses calculated by applying the same major transactional currencies calculation process to cost of sales and selling, general and administrative expenses as for the impact on sales. The I&SS segment enters into its own foreign exchange hedging transactions, and the impact of those transactions is included in the impact of foreign exchange rate fluctuations on operating income (loss) for that segment.
This information is not a substitute for Sony’s consolidated financial statements measured in accordance with IFRS. However, Sony believes that these disclosures provide additional useful analytical information to investors regarding the operating performance of Sony.
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Status of Cash Flows*
Operating Activities: Net cash inflow from operating activities during the current quarter was 198.7 billion yen, an increase of 36.0 billion yen year-on-year.
For all segments excluding the Financial Services segment, there was a net cash inflow of 26.2 billion yen, a decrease of 108.9 billion yen year-on-year. This decrease was primarily due to a larger increase in inventories and content assets, partially offset by the positive impact of a year-on-year increase in income before income tax after taking into account non-cash adjustments (including depreciation and amortization, including amortization of contract costs, other operating (income) expense, net and (gain) loss on securities, net).
The Financial Services segment had a net cash inflow of 211.9 billion yen, an increase of 163.9 billion yen year-on-year. This increase was mainly due to a smaller year-on-year increase in investments and advances in the financial services business, partially offset by a smaller increase in deposits from customers at Sony Bank.
Investing Activities: During the current quarter, Sony used 191.2 billion yen of net cash in investing activities, an increase of 38.9 billion yen year-on-year.
For all segments excluding the Financial Services segment, there was a 185.7 billion yen net cash outflow, an increase of 38.4 billion yen year-on-year. This increase was mainly due to payments for the purchase of shares and related assets of certain subsidiaries of Kobalt and an additional investment in Epic Games, partially offset by a year-on-year decrease in payments for fixed asset purchases. Additionally, the same period of the previous fiscal year included a payment for an investment in Bilibili.
The Financial Services segment used 5.6 billion yen of net cash in investing activities, essentially flat year-on-year.
Financing Activities: During the current quarter, Sony used 67.4 billion yen of net cash in financing activities, a decrease of 0.1 billion yen year-on-year.
For all segments excluding the Financial Services segment, there was a 64.8 billion yen net cash outflow, an increase of 10.1 billion yen year-on-year. This increase was mainly due to payments for the repurchase of Sony’s own common stock (722,800 shares for a total purchase price of 7.5 billion yen, as of June 30, 2021) which was approved at a meeting of the Board of Directors held on April 28, 2021 and a year-on-year increase in dividends payments.
In the Financial Services segment, there was a 41.9 billion yen net cash outflow, an increase of 9.3 billion yen year-on-year. This increase was mainly due to an increase in dividend payments.
Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in foreign exchange rates, the total outstanding balance of cash and cash equivalents as of June 30, 2021 was 1 trillion 725.2 billion yen. Cash and cash equivalents of all segments excluding the Financial Services segment was 1 trillion 63.6 billion yen as of June 30, 2021, a decrease of 226.1 billion yen compared with the balance as of March 31, 2021, and an increase of 174.5 billion yen compared with the balance as of June 30, 2020. Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 661.6 billion yen as of June 30, 2021, an increase of 164.4 billion yen compared with the balance as of March 31, 2021, and an increase of 101.8 billion yen compared with the balance as of June 30, 2020.
*Sony’s disclosure includes information regarding cash flow for all segments excluding the Financial Services segment. This information is derived from the following condensed statement of cash flows. The condensed statement of cash flows, which includes the above-mentioned cash flow information, is not prepared in accordance with IFRS, which Sony uses to prepare its condensed consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a comparative presentation may be useful in understanding and analyzing Sony’s condensed consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, but are eliminated in the consolidated figures shown below.
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Condensed Statements of Cash Flows
Yen in millions | ||||||||||||||||||||||||
Three months ended June 30 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||
Financial Services | | Sony without Financial Services |
| Consolidated | ||||||||||||||||||||
2020 | 2021 | 2020 | 2021 | 2020 | 2021 | |||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Income (loss) before income taxes | 35,989 | 24,013 | 252,381 | 298,355 | 268,562 | 283,210 | ||||||||||||||||||
Adjustments to reconcile income (loss) before income taxes to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||
Depreciation and amortization, including amortization of contract costs | 5,757 | 6,243 | 155,756 | 171,679 | 161,513 | 177,922 | ||||||||||||||||||
Amortization of deferred insurance acquisition costs | 5,434 | 15,042 | - | - | 5,434 | 15,042 | ||||||||||||||||||
Other operating (income) expense, net | 96 | 48 | (10,786 | ) | (1,149 | ) | (10,690 | ) | (1,101 | ) | ||||||||||||||
(Gain) loss on securities, net (other than Financial Services segment) | - | - | (52,650 | ) | (742 | ) | (52,650 | ) | (742 | ) | ||||||||||||||
Change in future insurance policy benefits and other | 83,810 | 95,162 | - | - | 83,810 | 95,162 | ||||||||||||||||||
Change in policyholders’ account in the life insurance business, less cash impact | 171,276 | 104,840 | - | - | 171,276 | 104,840 | ||||||||||||||||||
Net cash impact of policyholders’ account in the life insurance business | 29,789 | 35,427 | - | - | 29,789 | 35,427 | ||||||||||||||||||
Changes in assets and liabilities: | ||||||||||||||||||||||||
(Increase) decrease in trade receivables and contract assets | (20,294 | ) | (11,256 | ) | 14,469 | (60,778 | ) | 26 | (74,204 | ) | ||||||||||||||
(Increase) decrease in inventories | - | - | (25,996 | ) | (120,542 | ) | (25,996 | ) | (120,542 | ) | ||||||||||||||
(Increase) decrease in investments and advances in the Financial Services segment | (539,219 | ) | (320,192 | ) | - | - | (539,219 | ) | (320,192 | ) | ||||||||||||||
(Increase) decrease in content assets | - | - | (30,011 | ) | (132,147 | ) | (30,011 | ) | (132,147 | ) | ||||||||||||||
(Increase) decrease in deferred insurance acquisition costs | (21,300 | ) | (26,203 | ) | - | - | (21,300 | ) | (26,203 | ) | ||||||||||||||
Increase (decrease) in trade payables | (1,149 | ) | (27,252 | ) | 1,312 | 80,632 | 163 | 55,195 | ||||||||||||||||
Increase (decrease) in deposits from customers in the banking business | 116,592 | 38,039 | - | - | 116,592 | 38,039 | ||||||||||||||||||
Increase (decrease) in borrowings in the life insurance business and the banking business | 195,116 | 241,847 | - | - | 195,116 | 241,847 | ||||||||||||||||||
Other | (13,960 | ) | 36,128 | (169,371 | ) | (209,134 | ) | (189,650 | ) | (172,819 | ) | |||||||||||||
|
|
|
|
| ||||||||||||||||||||
Net cash provided by (used in) operating activities | 47,937 | 211,886 | 135,104 | 26,174 | 162,765 | 198,734 | ||||||||||||||||||
|
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|
|
|
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Yen in millions | ||||||||||||||||||||||||
Three months ended June 30 | ||||||||||||||||||||||||
Financial Services | | Sony without Financial Services |
| Consolidated | ||||||||||||||||||||
2020 | 2021 | 2020 | 2021 | 2020 | 2021 | |||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||
Cash flows from investing activities: |
| |||||||||||||||||||||||
Payments for property, plant and equipment and other intangible assets | (5,674 | ) | (5,580 | ) | (122,491 | ) | (87,941 | ) | (128,100 | ) | (93,521 | ) | ||||||||||||
Payments for investments and advances (other than Financial Services segment) | - | - | (48,072 | ) | (32,045 | ) | (48,072 | ) | (32,045 | ) | ||||||||||||||
Proceeds from sales or return of investments and collections of advances (other than Financial Services segment) | - | - | 13,330 | 9,328 | 13,330 | 9,328 | ||||||||||||||||||
Other | 108 | - | 9,979 | (74,999 | ) | 10,477 | (74,999 | ) | ||||||||||||||||
|
|
|
|
| ||||||||||||||||||||
Net cash provided by (used in) investing activities | (5,566 | ) | (5,580 | ) | (147,254 | ) | (185,657 | ) | (152,365 | ) | (191,237 | ) | ||||||||||||
|
|
|
|
| ||||||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Increase (decrease) in borrowings, net | (2,296 | ) | (2,605 | ) | (25,618 | ) | (19,412 | ) | (27,906 | ) | (22,016 | ) | ||||||||||||
Dividends paid | (30,453 | ) | (39,159 | ) | (30,095 | ) | (36,849 | ) | (30,094 | ) | (36,849 | ) | ||||||||||||
Other | 109 | (170 | ) | 1,014 | (8,573 | ) | (9,518 | ) | (8,577 | ) | ||||||||||||||
|
|
|
|
| ||||||||||||||||||||
Net cash provided by (used in) financing activities | (32,640 | ) | (41,934 | ) | (54,699 | ) | (64,834 | ) | (67,518 | ) | (67,442 | ) | ||||||||||||
|
|
|
|
| ||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | - | - | (6,496 | ) | (1,819 | ) | (6,496 | ) | (1,819 | ) | ||||||||||||||
|
|
|
|
| ||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 9,731 | 164,372 | (73,345 | ) | (226,136 | ) | (63,614 | ) | (61,764 | ) | ||||||||||||||
Cash and cash equivalents at beginning of the fiscal year | 550,039 | 497,218 | 962,484 | 1,289,764 | 1,512,523 | 1,786,982 | ||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||
Cash and cash equivalents at end of the period | 559,770 | 661,590 | 889,139 | 1,063,628 | 1,448,909 | 1,725,218 |
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ii) Issues Facing Sony and Management’s Response to those Issues
Note for readers of this English translation:
There was no significant change from the information presented in the Trend Information section of the Annual Report on Form 20-F filed with the SEC on June 22, 2021. Any forward-looking statements included in the descriptions below are based on management’s current judgment.
URL: The Annual Report on Form 20-F filed with the SEC on June 22, 2021
https://www.sec.gov/Archives/edgar/data/313838/000119312521195631/d151790d20f.htm
iii) Research and Development
Note for readers of this English translation:
There was no significant change from the information presented as the Research and Development in the Annual Report on Form 20-F filed with the SEC on June 22, 2021.
URL: The Annual Report on Form 20-F filed with the SEC on June 22, 2021
https://www.sec.gov/Archives/edgar/data/313838/000119312521195631/d151790d20f.htm
Research and development costs for the three months ended June 30, 2021 totaled 133.7 billion yen. There were no significant changes in research and development activities for the period.
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Table of Contents
iv) Liquidity Management and Market Access
Note for readers of this English translation:
Except for the information related to the committed lines of credit and others set forth below, there was no significant change from the information presented in the Annual Report on Form 20-F filed with the SEC on June 22, 2021. The changes are indicated by underlines below. Any forward-looking statements included in the descriptions below are based on management’s current judgment.
URL: The Annual Report on Form 20-F filed with the SEC on June 22, 2021
https://www.sec.gov/Archives/edgar/data/313838/000119312521195631/d151790d20f.htm
An important financial objective of Sony is to maintain the strength of its balance sheet, 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 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 1,053.6 billion yen in total for Sony Group Corporation, SGTS and SCC as of March 31, 2021. There were no amounts outstanding under the CP programs as of March 31, 2021.
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 579.1 billion yen in unused committed lines of credit, as of June 30, 2021. 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 1.05 billion U.S. dollar multicurrency 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.
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.
There were no material contracts executed or determined to be executed during the three months ended June 30, 2021.
Note for readers of this English translation:
There was no significant change from the information presented in the Annual Report on Form 20-F (“Patents and Licenses” in Item 4) filed with the SEC on June 22, 2021. This disclosure does not correspond to or update Item 10.C of the Annual Report on Form 20-F.
URL: The Annual Report on Form 20-F filed with the SEC on June 22, 2021
https://www.sec.gov/Archives/edgar/data/313838/000119312521195631/d151790d20f.htm
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Table of Contents
(1) Information on the Company’s Shares
i) Total Number of Shares
1) Total Number of Shares
Class | Total number of shares authorized to be issued | |
Common stock | 3,600,000,000 | |
Total | 3,600,000,000 |
2) Number of Shares Issued
Class | Number of shares issued | Name of Securities Exchanges where the shares are listed or authorized Financial Instruments Firms Association where the shares are registered | Description | |||||
As of the end of the first quarterly period (June 30, 2021) | As of the filing date of the Quarterly Securities Report (August 12, 2021) | |||||||
Common stock | 1,261,058,781 | 1,261,058,781 | Tokyo Stock Exchange New York Stock Exchange | The number of shares constituting one full unit is one hundred (100). | ||||
Total | 1,261,058,781 | 1,261,058,781 | — | — |
Note: | The Company’s shares of common stock are listed on the First Section of the Tokyo Stock Exchange in Japan. |
ii) Stock Acquisition Rights (“SARs”)
①Description of Stock Option
Not applicable.
②Other Stock Acquisition Rights
Not applicable.
Note for readers of this English translation:
The above means that there was no issuance of SARs during the three months ended June 30, 2021.
iii) Status of the Exercise of Moving Strike Convertible Bonds
Not applicable.
iv) Changes in the Total Number of Shares Issued and the Amount of Common Stock, etc.
Period | Change in the total number of shares issued (Thousands) | Balance of the total number of shares issued (Thousands) | Change in the amount of common stock (Yen in Millions) | Balance of the amount of common stock (Yen in Millions) | Change in the legal capital surplus (Yen in Millions) | Balance of the legal capital surplus (Yen in Millions) | ||||||
From April 1 to June 30, 2021 | — | 1,261,059 | — | 880,214 | — | 1,093,907 |
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Table of Contents
v) Status of Major Shareholders
(As of June 30, 2021)
Name | Address | Number of shares held (Thousands) | Percentage of shares held to total shares (Excluding treasury shares) issued (%) | |||
Citibank as Depositary Bank for Depositary Receipt Holders *1 (Local Custodian: MUFG Bank, Ltd.) | 388 Greenwich St., 14th fl., New York, NY 10013, U.S.A. (2-7-1, Marunouchi, Chiyoda-ku, Tokyo) | 121,713 | 9.82 | |||
The Master Trust Bank of Japan, Ltd. (Trust account) *2 | 2-11-3, Hamamatsu-cho, Minato-ku, Tokyo | 114,447 | 9,24 | |||
Custody Bank of Japan, Ltd. (Trust account) *2 | 1-8-12, Harumi, Chuo-ku, Tokyo | 69,597 | 5.62 | |||
Custody Bank of Japan, Ltd. (Trust account7) *2 | 1-8-12, Harumi, Chuo-ku, Tokyo | 24,499 | 1.98 | |||
JP Morgan Chase Bank 385632 *3 (Local Custodian: Mizuho Bank, Ltd.) | 25 Bank Street, Canary Wharf, London, E14 5JP, United Kingdom (Shinagawa Intercity Tower A, 2-15-1, Konan, Minato-ku, Tokyo) | 23,256 | 1.88 | |||
SSBTC Client Omnibus Account *3 (Local Custodian: The Hongkong and Shanghai Banking Corporation Limited, Tokyo Branch) | One Lincoln Street, Boston MA USA 02111 (3-11-1, Nihonbashi, Chuo-ku, Tokyo) | 21,409 | 1.73 | |||
Government of Norway (Local Custodian: Citibank, N.A., Tokyo Branch) | Bankplassen 2, 0107 Oslo 1 Oslo 0107 No (6-27-30 Shinjuku, Shinjuku-ku, Tokyo ) | 19,589 | 1.58 | |||
State Street Bank West Client – Treaty 505234 *3 (Local Custodian: Mizuho Bank, Ltd.) | 1776 Heritage Drive, North Quincy, MA 02171, U.S.A. 2-15-1, Konan, Minato-ku, Tokyo) | 19,576 | 1.58 | |||
Custody Bank of Japan, Ltd. (Trust account5) *2 | 1-8-12, Harumi, Chuo-ku, Tokyo | 19,522 | 1.58 | |||
Custody Bank of Japan, Ltd. (Trust account6) *2 | 1-8-12, Harumi, Chuo-ku, Tokyo | 17,148 | 1.38 | |||
Total | 450,758 | 36.37 |
Notes:
*1. | Citibank as Depositary Bank for Depositary Receipt Holders is the nominee of Citibank, N.A. |
*2. | The shares held by each shareholder are held in trust for investors, including shares in securities investment trusts. |
*3. | Each shareholder provides depositary services for shares owned by institutional investors, mainly in Europe and North America. These shareholders are also the nominees for these investors. |
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4. | Nomura Asset Management Co., Ltd. filed its “Bulk Shareholding Report” with the Kanto Financial Bureau in Japan as of October 6, 2020 and reported that Nomura Asset Management Co., Ltd. and three joint holders held shares of the Company as of September 30, 2020 as provided in the below table. As of June 30, 2021, the Company has not been able to confirm the entry of such parties in the register of shareholders. |
Name | Number of shares, etc. held (Thousands) | Percentage of shares, etc. held to total shares issued (%) | ||
Nomura Asset Management Co., Ltd. and 3 Joint Holders | 63,157 | 5.01 |
5. | Sumitomo Mitsui Trust Bank, Limited filed its “Amendment to the Bulk Shareholding Report” with the Kanto Financial Bureau in Japan as of September 20, 2019 and reported that Sumitomo Mitsui Trust Asset Management Co., Ltd. and one joint holder held shares of the Company as of September 13, 2019 as provided in the below table. As of June 30, 2021, the Company has not been able to confirm the entry of such parties in the register of shareholders. |
Name | Number of shares, etc. held (Thousands) | Percentage of shares, etc. held to total shares issued (%) | ||
Sumitomo Mitsui Trust Asset Management Co., Ltd. and 1 Joint Holder | 72,546 | 5.70 |
6. | BlackRock Japan Co., Ltd. filed its “Amendment to the Bulk Shareholding Report” with the Kanto Financial Bureau in Japan as of March 22, 2017 and reported that BlackRock Japan Co., Ltd. and eight Joint Holders held shares of the Company as of March 15, 2017 as provided in the below table. As of June 30, 2021, the Company has not been able to confirm the entry of such parties in the register of shareholders. |
Name | Number of shares, etc. held (Thousands) | Percentage of shares, etc. held to total shares issued (%) | ||
BlackRock Japan Co., Ltd. and 8 Joint Holders | 79,185 | 6.27 |
vi) Status of Voting Rights
1) Shares Issued
(As of June 30, 2021)
Classification | Number of shares of common stock | Number of voting rights (Units) | Description | ||||||||||||
Shares without voting rights | — | — | — | ||||||||||||
Shares with restricted voting rights (Treasury stock, etc.) | — | — | — | ||||||||||||
Shares with restricted voting rights (Others) | — | — | — | ||||||||||||
Shares with full voting rights (Treasury stock, etc.) | 21,860,400 | — | — | ||||||||||||
Shares with full voting rights (Others) | 1,237,354,200 | 12,373,542 | — | ||||||||||||
Shares constituting less than one full unit | 1,844,181 | — | | Shares constituting less than one full unit (100 shares) | |||||||||||
Total number of shares issued | 1,261,058,781 | — | — | ||||||||||||
Total voting rights held by all shareholders | — | 12,373,542 | — |
Note: | Included in “Shares with full voting rights (Others)” under “Number of shares of common stock” are 18,900 shares of common stock held under the name of Japan Securities Depository Center, Incorporated. Also included in “Shares with full voting rights (Others)” under “Number of voting rights (Units)” are 189 units of voting rights relating to the shares of common stock with full voting rights held under the name of Japan Securities Depository Center, Incorporated. |
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Table of Contents
2) Treasury Stock, etc.
(As of June 30, 2021)
Name of shareholder | Address of shareholder | Number of shares held under own name | Number of shares held under the names of others | Total number held | Percentage of shares held to total shares issued (%) | |||||
Sony Group Corporation (Treasury stock) | 1-7-1, Konan, Minato-ku, Tokyo | 21,860,400 | — | 21,860,400 | 1.73 | |||||
Total | — | 21,860,400 | — | 21,860,400 | 1.73 |
Notes:
1. | In addition to the 21,860,400 shares listed above, there are 300 shares of common stock held in the name of the Company in the register of shareholders that the Company does not beneficially own. These shares are included in “Shares with full voting rights (Others)” in Table 1) “Shares Issued” above. |
2. | Upon the disposal of treasury shares mainly due to the exercise of SARs (including the exercise of unsecured convertible bonds with SARs (6th series)) from July 1, 2021 to July 31, 2021, the number of shares held decreased by 214 thousand shares. |
3. | Upon the disposal of treasury shares as restricted stock compensation on July 20, 2021, the number of shares held decreased by 299 thousand shares. |
Outline of the restricted stock disposed as compensation on July 20, 2021 is as follows:
• | Disposal Price: 11,000 yen per share |
• | Allottees: 6 Corporate Executive Officers of the Company, |
9 Non-Executive Directors of the Company,
14 Executives of the Corporation,
19 Executives of subsidiaries of the Company.
(2) Directors and Corporate Executive Officers
There was no change in directors or corporate executive officers in the period from the filing date of the Securities Report (Yukashoken Houkokusho) for the fiscal year ended March 31, 2021 to the filing date of this Quarterly Securities Report (Shihanki Houkokusho).
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Page | ||||
21 | ||||
21 | ||||
23 | ||||
24 | ||||
Condensed Consolidated Statements of Changes in Stockholders’ Equity | 25 | |||
26 | ||||
84 |
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
(1) Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Financial Position (Unaudited)
Yen in millions | ||||||||||||||||
Note | April 1, 2020 | March 31, 2021 | June 30, 2021 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | 1,512,523 | 1,786,982 | 1,725,218 | |||||||||||||
Investments and advances in the Financial Services segment (including assets pledged that secured parties are permitted to sell or repledge of 54,745 million yen, 98,119 million yen and 99,077 million yen as of April 1, 2020, March 31, 2021 and June 30, 2021, respectively) | 4 | 327,092 | 411,982 | 390,918 | ||||||||||||
Trade and other receivables, and contract assets | 1,194,334 | 1,365,493 | 1,441,588 | |||||||||||||
Inventories | 559,779 | 636,668 | 758,041 | |||||||||||||
Other financial assets | 4 | 135,482 | 117,682 | 98,906 | ||||||||||||
Other current assets | 441,974 | 396,210 | 437,308 | |||||||||||||
Total current assets | 4,171,184 | 4,715,017 | 4,851,979 | |||||||||||||
Non-current assets: | ||||||||||||||||
Investments accounted for using the equity method | 204,291 | 225,086 | 227,001 | |||||||||||||
Investments and advances in the Financial Services segment (including assets pledged that secured parties are permitted to sell or repledge of 1,059,901 million yen, 1,820,723 million yen and 2,085,496 million yen as of April 1, 2020, March 31, 2021 and June 30, 2021, respectively) | 4 | 16,352,285 | 17,296,546 | 17,680,447 | ||||||||||||
Property, plant and equipment | 917,198 | 990,541 | 1,052,944 | |||||||||||||
Right-of-use assets | 373,282 | 358,034 | 370,399 | |||||||||||||
Goodwill | 690,929 | 726,109 | 789,918 | |||||||||||||
Content assets | 992,644 | 1,062,547 | 1,098,676 | |||||||||||||
Other intangible assets | 377,500 | 391,055 | 392,368 | |||||||||||||
Deferred insurance acquisition costs | 187,904 | 623,986 | 636,679 | |||||||||||||
Deferred tax assets | 210,333 | 215,669 | 193,736 | |||||||||||||
Other financial assets | 4 | 321,721 | 695,764 | 753,449 | ||||||||||||
Other non-current assets | 167,795 | 207,489 | 222,093 | |||||||||||||
Total non-current assets | 20,795,882 | 22,792,826 | 23,417,710 | |||||||||||||
Total assets | 24,967,066 | 27,507,843 | 28,269,689 |
(Continued on the following page.)
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Table of Contents
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Financial Position (Unaudited) (Continued)
Yen in millions | ||||||||||||||||
Note | April 1, 2020 | March 31, 2021 | June 30, 2021 | |||||||||||||
LIABILITIES | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Short-term borrowings | 824,045 | 1,201,747 | 1,459,658 | |||||||||||||
Current portion of long-term debt | 4 | 98,923 | 205,406 | 207,180 | ||||||||||||
Trade and other payables | 1,310,536 | 1,596,563 | 1,682,260 | |||||||||||||
Deposits from customers in the banking business | 2,347,387 | 2,682,156 | 2,717,538 | |||||||||||||
Income taxes payables | 85,346 | 84,431 | 77,839 | |||||||||||||
Participation and residual liabilities in the Pictures segment | 163,007 | 161,433 | 159,379 | |||||||||||||
Other financial liabilities | 4 | 56,152 | 54,341 | 41,750 | ||||||||||||
Other current liabilities | 1,263,944 | 1,367,527 | 1,257,852 | |||||||||||||
Total current liabilities | 6,149,340 | 7,353,604 | 7,603,456 | |||||||||||||
Non-current liabilities: | ||||||||||||||||
Long-term debt | 4 | 939,030 | 1,053,636 | 1,044,969 | ||||||||||||
Defined benefit liabilities | 329,621 | 267,222 | 261,444 | |||||||||||||
Deferred tax liabilities | 1,041,156 | 816,587 | 853,135 | |||||||||||||
Future insurance policy benefits and other | 5 | 6,519,577 | 6,614,585 | 6,708,960 | ||||||||||||
Policyholders’ account in the life insurance business | 5 | 3,640,010 | 4,328,894 | 4,469,224 | ||||||||||||
Participation and residual liabilities in the Pictures segment | 119,702 | 116,537 | 121,791 | |||||||||||||
Other financial liabilities | 4 | 146,834 | 139,417 | 161,205 | ||||||||||||
Other non-current liabilities | 87,320 | 93,022 | 96,495 | |||||||||||||
Total non-current liabilities | 12,823,250 | 13,429,900 | 13,717,223 | |||||||||||||
Total liabilities | 18,972,590 | 20,783,504 | 21,320,679 | |||||||||||||
EQUITY | ||||||||||||||||
Sony Group Corporation’s stockholders’ equity: | 6 | |||||||||||||||
Common stock | 880,214 | 880,214 | 880,214 | |||||||||||||
Additional paid-in capital | 1,297,554 | 1,489,597 | 1,475,112 | |||||||||||||
Retained earnings | 1,949,697 | 2,914,503 | 3,087,094 | |||||||||||||
Accumulated other comprehensive income | 979,476 | 1,520,257 | 1,588,475 | |||||||||||||
Treasury stock, at cost | (232,503 | ) | (124,228 | ) | (127,699 | ) | ||||||||||
Equity attributable to Sony Group Corporation’s stockholders | 4,874,438 | 6,680,343 | 6,903,196 | |||||||||||||
Noncontrolling interests | 1,120,038 | 43,996 | 45,814 | |||||||||||||
Total equity | 5,994,476 | 6,724,339 | 6,949,010 | |||||||||||||
Total liabilities and equity | 24,967,066 | 27,507,843 | 28,269,689 |
The accompanying notes are an integral part of these statements.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
Three months ended June 30
Yen in millions | ||||||||||||
Three months ended June 30 | ||||||||||||
Note | 2020 | 2021 | ||||||||||
Sales and financial services revenue: | 7 | |||||||||||
Sales | 1,524,960 | 1,844,713 | ||||||||||
Financial services revenue | 437,989 | 412,130 | ||||||||||
Total sales and financial services revenue | 1,962,949 | 2,256,843 | ||||||||||
Costs and expenses: | ||||||||||||
Cost of sales | 1,049,423 | 1,248,773 | ||||||||||
Selling, general and administrative | 300,285 | 345,302 | ||||||||||
Financial services expenses | 401,904 | 388,069 | ||||||||||
Other operating (income) expense, net | (10,690 | ) | (1,101 | ) | ||||||||
Total costs and expenses | 1,740,922 | 1,981,043 | ||||||||||
Share of profit (loss) of investments accounted for using the equity method | (302 | ) | 4,268 | |||||||||
Operating income | 221,725 | 280,068 | ||||||||||
Financial income | 56,676 | 11,685 | ||||||||||
Financial expenses | 9,839 | 8,543 | ||||||||||
Income before income taxes | 268,562 | 283,210 | ||||||||||
Income taxes | 64,344 | 70,095 | ||||||||||
Net income | 204,218 | 213,115 | ||||||||||
Net income attributable to | ||||||||||||
Sony Group Corporation’s stockholders | 193,583 | 211,829 | ||||||||||
Noncontrolling interests | 10,635 | 1,286 |
Yen | ||||||||||||
Three months ended June 30 | ||||||||||||
Note | 2020 | 2021 | ||||||||||
Per share data: | 8 | |||||||||||
Net income attributable to Sony Group Corporation’s stockholders | ||||||||||||
– Basic | 158.59 | 170.95 | ||||||||||
– Diluted | 155.27 | 169.22 |
The accompanying notes are an integral part of these statements.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Yen in millions | ||||||||||||
Three months ended June 30 | ||||||||||||
Note | 2020 | 2021 | ||||||||||
Net income | 204,218 | 213,115 | ||||||||||
Other comprehensive income, net of tax — | 6 | |||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||
Changes in equity instruments measured at fair value through other comprehensive income | 40,098 | 26,370 | ||||||||||
Remeasurement of defined benefit pension plans | (39 | ) | (1,697 | ) | ||||||||
Share of other comprehensive income of investments accounted for using the equity method | 36 | (14 | ) | |||||||||
Items that may be reclassified subsequently to profit or loss | ||||||||||||
Changes in debt instruments measured at fair value through other comprehensive income | (67,858 | ) | 34,994 | |||||||||
Cash flow hedges | (260 | ) | (198 | ) | ||||||||
Insurance contract valuation adjustments | (1,650 | ) | 285 | |||||||||
Exchange differences on translating foreign operations | 793 | 7,184 | ||||||||||
Share of other comprehensive income of investments accounted for using the equity method | (67 | ) | (31 | ) | ||||||||
Total other comprehensive income, net of tax | (28,947 | ) | 66,893 | |||||||||
Comprehensive income | 175,271 | 280,008 | ||||||||||
Comprehensive income attributable to | ||||||||||||
Sony Group Corporation’s stockholders | 190,143 | 278,349 | ||||||||||
Noncontrolling interests | (14,872 | ) | 1,659 |
The accompanying notes are an integral part of these statements.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
Yen in millions | ||||||||||||||||||||||||||||||||||||
Note | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income | Treasury stock, at cost | Sony Group Corporation’s stockholders’ equity | Noncontrolling interests | Total equity | ||||||||||||||||||||||||||||
Balance at April 1, 2020 | 880,214 | 1,297,554 | 1,949,697 | 979,476 | (232,503 | ) | 4,874,438 | 1,120,038 | 5,994,476 | |||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 193,583 | 193,583 | 10,635 | 204,218 | ||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 6 | (3,440 | ) | (3,440 | ) | (25,507 | ) | (28,947 | ) | |||||||||||||||||||||||||||
Total comprehensive income | 193,583 | (3,440 | ) | 190,143 | (14,872 | ) | 175,271 | |||||||||||||||||||||||||||||
Transfer to retained earnings | 178 | (178 | ) | - | - | |||||||||||||||||||||||||||||||
Transactions with stockholders and other: | ||||||||||||||||||||||||||||||||||||
Exercise of stock acquisition rights | (0 | ) | (565 | ) | 4,822 | 4,257 | 4,257 | |||||||||||||||||||||||||||||
Conversion of convertible bonds | (143 | ) | (225 | ) | 2,423 | 2,055 | 2,055 | |||||||||||||||||||||||||||||
Stock-based compensation | (26 | ) | (26 | ) | (26 | ) | ||||||||||||||||||||||||||||||
Dividends declared | (30,504 | ) | (30,504 | ) | (12,467 | ) | (42,971 | ) | ||||||||||||||||||||||||||||
Purchase of treasury stock | (29 | ) | (29 | ) | (29 | ) | ||||||||||||||||||||||||||||||
Reissuance of treasury stock | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||
Transactions with noncontrolling interests shareholders and other | 1,907 | 1,907 | (1,585 | ) | 322 | |||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 880,214 | 1,299,292 | 2,112,164 | 975,858 | (225,287 | ) | 5,042,241 | 1,091,114 | 6,133,355 | |||||||||||||||||||||||||||
Yen in millions | ||||||||||||||||||||||||||||||||||||
Note | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income | Treasury stock, at cost | Sony Group Corporation’s stockholders’ equity | Noncontrolling interests | Total equity | ||||||||||||||||||||||||||||
Balance at April 1, 2021 | 880,214 | 1,489,597 | 2,914,503 | 1,520,257 | (124,228 | ) | 6,680,343 | 43,996 | 6,724,339 | |||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 211,829 | 211,829 | 1,286 | 213,115 | ||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 6 | 66,520 | 66,520 | 373 | 66,893 | |||||||||||||||||||||||||||||||
Total comprehensive income | 211,829 | 66,520 | 278,349 | 1,659 | 280,008 | |||||||||||||||||||||||||||||||
Transfer to retained earnings | (1,698 | ) | 1,698 | - | - | |||||||||||||||||||||||||||||||
Transactions with stockholders and other: | ||||||||||||||||||||||||||||||||||||
Exercise of stock acquisition rights | (1 | ) | (70 | ) | 1,450 | 1,379 | 1,379 | |||||||||||||||||||||||||||||
Conversion of convertible bonds | (109 | ) | (293 | ) | 2,626 | 2,224 | 2,224 | |||||||||||||||||||||||||||||
Stock-based compensation | 1,447 | 1,447 | 1,447 | |||||||||||||||||||||||||||||||||
Dividends declared | (37,177 | ) | (37,177 | ) | (2,029 | ) | (39,206 | ) | ||||||||||||||||||||||||||||
Purchase of treasury stock | (7,548 | ) | (7,548 | ) | (7,548 | ) | ||||||||||||||||||||||||||||||
Reissuance of treasury stock | 1 | 1 | 2 | 2 | ||||||||||||||||||||||||||||||||
Transactions with noncontrolling interests shareholders and other | (15,823 | ) | (15,823 | ) | 2,188 | (13,635 | ) | |||||||||||||||||||||||||||||
Balance at June 30, 2021 | 880,214 | 1,475,112 | 3,087,094 | 1,588,475 | (127,699 | ) | 6,903,196 | 45,814 | 6,949,010 |
The accompanying notes are an integral part of these statements.
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Yen in millions | ||||||||||||
Three months ended June 30 | ||||||||||||
Note | 2020 | 2021 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Income before income taxes | 268,562 | 283,210 | ||||||||||
Adjustments to reconcile income before income taxes to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization, including amortization of contract costs | 161,513 | 177,922 | ||||||||||
Amortization of deferred insurance acquisition costs | 5,434 | 15,042 | ||||||||||
Other operating (income) expense, net | (10,690 | ) | (1,101 | ) | ||||||||
Gain on securities, net (other than Financial Services segment) | (52,650 | ) | (742 | ) | ||||||||
Share of loss of investments accounted for using the equity method, net of dividends | 3,546 | 2,250 | ||||||||||
Change in future insurance policy benefits and other | 83,810 | 95,162 | ||||||||||
Change in policyholders’ account in the life insurance business, less cash impact | 171,276 | 104,840 | ||||||||||
Net cash impact of policyholders’ account in the life insurance business | 29,789 | 35,427 | ||||||||||
Changes in assets and liabilities: | ||||||||||||
(Increase) decrease in trade receivables and contract assets | 26 | (74,204 | ) | |||||||||
Increase in inventories | (25,996 | ) | (120,542 | ) | ||||||||
Increase in investments and advances in the Financial Services segment | (539,219 | ) | (320,192 | ) | ||||||||
Increase in content assets | (30,011 | ) | (132,147 | ) | ||||||||
Increase in deferred insurance acquisition costs | (21,300 | ) | (26,203 | ) | ||||||||
Increase in trade payables | 163 | 55,195 | ||||||||||
Increase in deposits from customers in the banking business | 116,592 | 38,039 | ||||||||||
Increase in borrowings in the life insurance business and the banking business | 195,116 | 241,847 | ||||||||||
(Increase) decrease in other financial assets and other current assets | (4,598 | ) | 8,252 | |||||||||
Decrease in other financial liabilities and other current liabilities | (138,362 | ) | (134,060 | ) | ||||||||
Income taxes paid | (61,193 | ) | (65,753 | ) | ||||||||
Other | 10,957 | 16,492 | ||||||||||
Net cash provided by operating activities | 162,765 | 198,734 |
(Continued on the following page.)
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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
Yen in millions | ||||||||||||
Three months ended June 30 | ||||||||||||
Note | 2020 | 2021 | ||||||||||
Cash flows from investing activities: | ||||||||||||
Payments for property, plant and equipment and other intangible assets | (128,100 | ) | (93,521 | ) | ||||||||
Proceeds from sales of property, plant and equipment and other intangible assets | 3,861 | 1,356 | ||||||||||
Payments for investments and advances (other than Financial Services segment) | (48,072 | ) | (32,045 | ) | ||||||||
Proceeds from sales or return of investments and collections of advances (other than Financial Services segment) | 13,330 | 9,328 | ||||||||||
Payments for purchase of businesses | (1,865 | ) | (76,155 | ) | ||||||||
Proceeds from sales of businesses | 1,313 | 6,012 | ||||||||||
Other | 7,168 | (6,212 | ) | |||||||||
Net cash used in investing activities | (152,365 | ) | (191,237 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||
Decrease in short-term borrowings, net | (9,313 | ) | (4,415 | ) | ||||||||
Proceeds from issuance of long-term debt | 4,178 | 6,102 | ||||||||||
Payments of long-term debt | (22,771 | ) | (23,703 | ) | ||||||||
Dividends paid | (30,094 | ) | (36,849 | ) | ||||||||
Payments for purchase of treasury stock | (29 | ) | (7,548 | ) | ||||||||
Other | (9,489 | ) | (1,029 | ) | ||||||||
Net cash used in financing activities | (67,518 | ) | (67,442 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (6,496 | ) | (1,819 | ) | ||||||||
Net decrease in cash and cash equivalents | (63,614 | ) | (61,764 | ) | ||||||||
Cash and cash equivalents at beginning of the fiscal year | 1,512,523 | 1,786,982 | ||||||||||
Cash and cash equivalents at end of the period | 1,448,909 | 1,725,218 |
The accompanying notes are an integral part of these statements.
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Index to Notes to Condensed Consolidated Financial Statements
Sony Group Corporation and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements | Page | |||
29 | ||||
30 | ||||
31 | ||||
45 | ||||
54 | ||||
56 | ||||
57 | ||||
8. Reconciliation of the differences between basic and diluted EPS | 57 | |||
58 | ||||
59 | ||||
64 | ||||
83 |
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Notes to Condensed Consolidated Financial Statements (Unaudited)
Sony Group Corporation and Consolidated Subsidiaries
1. | Reporting entity |
Sony Group Corporation is a public company domiciled in Japan. Sony Group Corporation and its consolidated subsidiaries (hereinafter collectively referred to as “Sony” or “Sony Group”) are engaged in the development, design, production, manufacture, offer and sale of various kinds of electronic equipment, instruments, and devices for consumer, professional and industrial markets such as network services, home gaming consoles and software, televisions, audio and video recorders and players, still and video cameras, smartphones, and image sensors. Sony’s primary manufacturing facilities are located in Asia including Japan. Sony also utilizes third-party contract manufacturers for certain products. Sony’s products and services are marketed throughout the world by sales subsidiaries and unaffiliated distributors as well as direct sales and offers via the internet. Sony is engaged in the development, production, manufacture, and distribution of recorded music and the management and licensing of the words and music of songs as well as production and distribution of animation titles, including game applications based on the animation titles. Sony is also engaged in the production, acquisition and distribution of motion pictures and television programming and the operation of television and digital networks. Further, Sony is also engaged in various financial services businesses, including life and non-life insurance businesses through its Japanese insurance subsidiaries and banking business through a Japanese internet-based banking subsidiary.
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2. | Basis of preparation |
Compliance with International Financial Reporting Standards
The condensed consolidated financial statements of Sony have been prepared in accordance with International Accounting Standards (“IAS”) 34 “Interim Financial Reporting”, as issued by the International Accounting Standards Board (“IASB”).
Sony adopted International Financial Reporting Standards (“IFRS”) for the first time this fiscal year (commencing on April 1, 2021 and ending on March 31, 2022), and so the annual consolidated financial statements for this fiscal year are the first ones prepared in conformity with IFRS. The date of Sony’s transition to IFRS is April 1, 2020. Sony adopted IFRS 1 “First-Time Adoption of International Financial Reporting Standards” (“IFRS 1”) for the transition to IFRS.
The effect of the transition to IFRS on Sony’s financial position, results of operations and cash flows is presented in Note 11.
Approval of condensed consolidated financial statements
The condensed consolidated financial statements were approved by Kenichiro Yoshida, Chairman, President and Chief Executive Officer, and Representative Corporate Executive Officer and Hiroki Totoki, Executive Deputy President and Chief Financial Officer and Representative Corporate Executive Officer on August 12, 2021.
Basis of measurement
The condensed consolidated financial statements have been prepared on a historical cost basis except for items such as financial instruments measured at fair value as separately described in Note 3.
Functional currency and presentation currency
The condensed consolidated financial statements have been presented in Japanese yen, which is the functional currency of Sony Group Corporation. All financial information presented in Japanese yen has been rounded to the nearest million Japanese yen.
Use of estimates and judgments
The preparation of the condensed consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual results could differ from these estimates and assumptions. These estimates and assumptions are reviewed on a continuous basis. Changes in these accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
The timing and extent to which the spread of COVID-19 may negatively impact Sony’s business will depend on future developments, which are uncertain. This uncertainty could result in greater variability in accounting estimates and assumptions.
Information about judgments that have been made in the process of applying accounting policies that have significant effects on the amounts reported in the condensed consolidated financial statements is as follows:
• | Classification of financial instruments (Note 3 I. Significant accounting policies (5) Financial instruments) |
Information about accounting estimates and assumptions that have significant effects on the amounts reported in the condensed consolidated financial statements is as follows:
• | Net realizable value of inventories (Note 3 I. Significant accounting policies (6) Inventories) |
• | Fair value of financial instruments (Note 3 I. Significant accounting policies (5) Financial instruments and (15) Fair value measurement) |
• | Impairment of property, plant and equipment, goodwill and intangible assets (Note 3 I. Significant accounting policies (10) Impairment of non-financial assets) |
• | Estimate of useful lives of intangible assets (Note 3 I. Significant accounting policies (9) Intangible assets and amortization, including content assets) |
• | Measurement of future insurance policy benefits and policyholders’ account in the life insurance business (Note 3 I. Significant accounting policies (11) Insurance-related accounts) |
• | Measurement of net defined benefit liabilities (assets) (Note 3 I. Significant accounting policies (13) Employee benefits) |
• | Measurement of participation and residual liabilities in the Pictures segment (Note 3 I. Significant accounting policies (12) Provisions) |
• | Recoverability of deferred tax assets (Note 3 I. Significant accounting policies (23) Income taxes) |
• | Measurement of fair value of assets acquired and liabilities assumed in business combinations (Note 3 I. Significant accounting policies (2) Business combinations) |
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3. | Summary of significant accounting policies |
I. | Significant accounting policies |
(1) | Basis of consolidation - |
i) | Subsidiaries |
A subsidiary is an entity controlled by Sony Group Corporation. Control is obtained when Sony Group Corporation is exposed, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the condensed consolidated financial statements of Sony from the date on which control is obtained until the date on which control is lost.
All intercompany transactions and receivables and payables are eliminated in the preparation of the condensed consolidated financial statements.
If any accounting policies applied by a subsidiary differ from those applied by Sony, adjustments are made to the financial statements of the subsidiary as necessary.
Any changes in ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration is directly recognized in equity and attributed to the owners of Sony. When control over a subsidiary is lost, the investment retained in the former subsidiary is remeasured at fair value as of the date when control is lost, and any gain or loss resulting from the loss of control is recognized in profit or loss.
ii) | Associates and joint ventures |
An associate is an entity over which Sony has significant influence, but does not have control or joint control, in terms of financial and operating policies.
A joint venture is an investee whereby two or more parties including Sony have the rights to the net assets of the investee in accordance with the terms of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
Investments in associates and joint ventures are accounted for using the equity method from the date on which significant influence or joint control is obtained until the date on which significant influence or joint control is lost. Under the equity method, investments in associates and joint ventures are recognized at cost, adjusted for Sony’s share of the profit or loss and other comprehensive income of the associates and joint ventures from the date on which Sony obtains significant influence or joint control to the date on which Sony loses such significant influence or joint control. Sony recognizes its share of profit or loss of the investees, net of income taxes after the elimination of unrealized intercompany profits, in the consolidated operating income (loss) to the extent of Sony’s interest in these entities.
For investments accounted for using the equity method, the carrying amount of each investment is tested for impairment as a single asset, when there is objective evidence that the investments may be impaired.
If any accounting policies applied by an associate or a joint venture differ from those applied by Sony, adjustments are made to the financial statements of the associate or the joint venture as necessary.
When an investment ceases to be an associate or a joint venture and the use of the equity method is discontinued, any gain or loss arising from discontinuation of the equity method is recognized in profit or loss.
iii) | Joint operations |
A joint operation is a joint arrangement whereby two or more parties including Sony have the rights to the assets, and obligations for the liabilities, relating to the investee in accordance with the terms of the joint arrangement.
Sony recognizes its share of the assets, liabilities, revenue and expenses related to joint operations.
iv) | Structured entities |
A structured entity is an entity designed so that voting or similar rights are not the dominant factor in deciding who controls the entity.
Sony has control and, therefore, consolidates a structured entity when Sony has exposure or rights to variable returns and has the ability to use its power over the structured entity to affect returns.
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(2) | Business combinations - |
Sony recognizes identifiable assets acquired and the liabilities assumed of an acquiree at their fair values at the acquisition date with limited exceptions.
Sony recognizes goodwill when the aggregate of the consideration transferred in a business combination, the amount of any non-controlling interests in the acquiree and the fair value of Sony’s previously held equity interest in the acquiree exceeds the net amount of the identifiable assets and liabilities of the acquiree at the acquisition date. If the aggregate above is less than the net amount of identifiable assets and liabilities, the difference is recognized as a gain. The consideration transferred is calculated as the sum of the fair values of the assets transferred, liabilities assumed and equity interest issued. Non-controlling interests are measured either at fair value or based on the non-controlling interests’ proportionate share of the acquiree’s net identifiable assets for each business combination transaction.
Acquisition-related costs are recognized as expenses in the period they are incurred.
(3) | Foreign currency translation - |
i) | Foreign currency transactions |
Foreign currency transactions are translated at the exchange rates prevailing at the transaction date or rates that approximate such rates. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate at the end of the period. Foreign exchange gains and losses resulting from translation and settlement are generally recognized in profit or loss. They are deferred in other comprehensive income if they relate to qualifying cash flow hedges.
ii) | Foreign operations |
Assets and liabilities of foreign operations such as overseas subsidiaries and associates are translated using the exchange rates at the end of the period, and revenue and expense items are translated using the average exchange rates for the period unless the exchange rates fluctuate significantly. Exchange differences arising from the translation are recognized in other comprehensive income.
On the disposal of a foreign operation, the cumulative amount of exchange differences relating to that foreign operation is reclassified to profit or loss.
(4) | Cash and cash equivalents - |
Cash and cash equivalents include all highly liquid investments, with original maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
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(5) | Financial instruments - |
Sony recognizes a financial instrument as a financial asset or a financial liability when Sony becomes party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Except for financial assets and financial liabilities measured at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability are added to the fair value of financial assets or subtracted from the fair value of financial liabilities at initial recognition.
i) | Non-derivative financial assets |
a. | Classification and measurement |
Non-derivative financial assets held by Sony are classified as financial assets measured at amortized cost, debt instruments measured at fair value through other comprehensive income, equity instruments measured at fair value through other comprehensive income or financial assets measured at fair value through profit or loss.
Financial assets measured at amortized cost
Sony classifies a financial asset as measured at amortized cost if the financial asset is held within a business model whose objective is to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial asset is measured at amortized cost by using the effective interest method after initial recognition. On derecognition of a financial asset measured at amortized cost, the difference between the carrying amount and the consideration received or receivable is recognized in profit or loss.
Debt instruments measured at fair value through other comprehensive income
A debt instrument is classified as a financial asset measured at fair value through other comprehensive income if the debt instrument is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial asset and the contractual terms of the financial asset 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 asset after initial recognition, except for impairment gains or losses and foreign exchange gains or losses, are recognized in other comprehensive income. Interest income from these financial assets is recognized in profit or loss using the effective interest method. On derecognition of a debt instrument measured at fair value through other comprehensive income, the cumulative amount previously recognized in other comprehensive income is reclassified to profit or loss.
In the life insurance business, the financial assets are held mainly from the perspective of asset-liability management (“ALM”). The objective of holding financial assets in the life insurance business is to match the interest rate sensitivity (duration) of financial assets and insurance contract liabilities (which mainly consists of future insurance policy benefits and the policyholders’ account in the life insurance business) as much as possible, in order to ensure sufficient cash flows are available to settle insurance claims when they come due. Sony manages these assets as one portfolio, based on the overall objective of managing duration and liquidity needs in a capital efficient manner. While some assets within the portfolio may be held for a longer period of time, Sony considers, because of its overall objective for these assets, that all the financial assets are held within one business model whose objective is achieved by both collecting cash flows and selling financial assets.
Equity instruments measured at fair value through other comprehensive income
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.
These financial assets are measured at fair value and subsequent changes in the fair value are recognized in other comprehensive income. Dividends from financial assets are recognized in profit or loss, and the cumulative amount recognized in other comprehensive income is transferred to retained earnings upon derecognition.
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Financial assets measured at fair value through profit or loss
Financial assets other than those measured at amortized cost or fair value through other comprehensive income are classified as financial assets measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss include financial assets held for trading.
In the life insurance business, investments held for variable annuities and variable life insurance contracts mainly consist of equity securities, debt securities and investment funds, which are measured at fair value through profit or loss.
For certain financial assets that would not normally be measured at fair value through profit and loss, Sony may, at initial recognition, choose the irrevocable option to measure such financial assets at fair value through profit or loss in order to eliminate or significantly reduce an accounting mismatch.
Sony has made the irrevocable election for some of the fixed-rate debt securities held by a subsidiary in the banking business as mentioned above. In relation to such debt securities, Sony utilizes derivatives to hedge the risk arising from the changes in the fair value of the debt securities due to unfavorable fluctuations of interest rates. Thus, this election is made to mitigate accounting mismatches derived from the changes in the fair value of the debt securities and derivatives used as hedging instruments by recognizing gains and losses from the changes in the fair value of the debt securities in profit or loss.
b. | Derecognition |
Sony derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or Sony transfers the contractual rights to receive the cash flows of the financial asset and substantially transfers all of the risks and rewards of the financial asset.
c. | Impairment |
Sony estimates expected credit losses and recognizes loss allowances for financial assets measured at amortized cost and debt instruments measured at fair value through other comprehensive income. At each reporting date, Sony measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, Sony measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. In assessing whether the credit risk has increased significantly or not, Sony uses the change in the risk of a default occurring over the expected life of the financial instrument and estimates expected credit losses by using the method which reflects the past loss rate and other reasonable and supportable forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
Sony measures the expected credit losses of a financial asset in a way that reflects an unbiased and probability-weighted amount incorporating the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.
However, for trade and other receivables, and contract assets including non-current other receivables in the Pictures segment, the loss allowance is measured at an amount equal to lifetime expected credit losses irrespective of the change of credit risk on a collective basis or an individual basis incorporating factors such as the past-due status and the attributes of the counterparties.
Sony determines a financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. The criteria that Sony uses to determine that a financial asset is credit-impaired include a default or delinquency of more than 90 days past due in interest or principal payments.
Sony writes off the gross carrying amount of a financial asset when it cannot reasonably expect to recover all or part of the asset.
Debt securities and housing loans in the Financial Services segment
The expected credit losses for debt securities and housing loans in the Financial Services segment are the product of the probability of default (“PD”), loss given default (“LGD”) and exposure at default (“EAD”), by leveraging the Basel III regulatory framework or based on the external information published by major credit rating agencies. Forward-looking economic information is also included in determining the PD.
Assessments on significant increases in credit risk are performed at the reporting date by comparing the risk of default occurring with that at initial recognition. Sony recognizes and measures the expected credit losses on a collective basis or an individual basis using reasonable and supportable information that is available without undue cost or effort, such as asset type, credit ratings, collateral collectability, past-due status and other relevant characteristics of financial instruments.
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In addition, Sony has applied the low credit risk exemption for certain debt securities rated “investment grade” by major credit rating agencies at the reporting date. For such instruments, Sony assumes that the credit risk has not increased significantly since initial recognition.
If contractual terms of a loan have been modified, it is necessary to recalculate the gross carrying amount of that loan by using the original effective interest rate and recognize a modification gain or loss in profit or loss.
ii) | Non-derivative financial liabilities |
Sony classifies non-derivative financial liabilities as either financial liabilities subsequently measured at amortized cost by using the effective interest method or financial liabilities measured at fair value through profit or loss.
Sony derecognizes a financial liability when it is extinguished, meaning when the obligation specified in the contract is discharged, cancelled or expires.
iii) | Derivative financial instruments and hedge accounting |
All derivatives are recognized as either assets or liabilities in the condensed consolidated statements of financial position at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically through profit or loss or other comprehensive income, depending on whether the derivative financial instrument qualifies as a hedge and the derivative is being used to hedge changes in cash flows.
Derivative financial instruments held by Sony are accounted for as described below.
Cash flow hedges
Changes in the fair value of derivatives that are designated and determined to be effective as cash flow hedges for forecasted transactions or exposures associated with recognized assets or liabilities are initially recorded in other comprehensive income and reclassified to profit or loss when the hedged transaction affects profit or loss. Changes in the fair value of the ineffective portion are immediately recognized in profit or loss.
Derivatives not designated as hedges
Changes in the fair value of derivatives not designated as hedges are immediately recognized in profit or loss.
Assessment of hedge effectiveness
When applying hedge accounting, Sony formally documents all hedging relationships between the derivatives designated as hedges and the hedged items, as well as its risk management objectives and strategies for undertaking various hedging activities. Sony links all hedges that are designated as cash flow hedges to specific assets or liabilities in the condensed consolidated statements of financial position or to the specific forecasted transactions. Sony also assesses, both at the inception of the hedge and on an on-going basis, whether the derivatives that are designated as hedges have an economic relationship with the hedged item in offsetting changes in fair value or cash flows of hedged items. The effect of credit risk does not dominate the value changes that result from the underlying economic relationship. In addition, the hedge ratio of the hedging relationship is designed to be the same as that resulting from the quantity of the hedged item that Sony actually hedges and the quantity of the hedging instrument that Sony actually uses to hedge that quantity of the hedged item. When it is determined that a derivative no longer has an economic relationship with the hedged item, Sony discontinues hedge accounting.
iv) | Offsetting a financial asset and a financial liability |
Sony offsets a financial asset and a financial liability and presents the net amount in the condensed consolidated statements of financial position when Sony currently has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
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(6) | Inventories - |
Inventories are measured at the lower of cost or net realizable value. The cost of inventories is determined on the “weighted average cost” basis. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
(7) | Property, plant and equipment and depreciation - |
Sony has adopted the cost model for the measurement of property, plant and equipment and presents an item of property, plant and equipment at its cost less any accumulated depreciation and any accumulated impairment losses. The cost of an item of property, plant and equipment includes any costs directly attributable to the acquisition of the asset as well as costs of its dismantlement, removal or restoration. Property, plant and equipment are depreciated on a straight-line basis over their useful lives (depreciation period ranging from 2 to 50 years for buildings and from 2 to 10 years for machinery and equipment). Sony reviews the residual values and the useful lives at each fiscal year-end, or sooner if circumstances require.
(8) | Leases - |
When entering into a contract, Sony determines whether an arrangement contains a lease at its inception. An arrangement contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Assets and liabilities recognized from leases are included in right-of-use (“ROU”) assets, the current portion of long-term debt, and long-term debt in Sony’s condensed consolidated statements of financial position.
ROU assets represent Sony’s right to use an underlying asset for the lease term and lease liabilities represent Sony’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. ROU assets also include any lease payments and initial direct costs incurred on or before the commencement date and exclude lease incentives. In determining the present value of lease payments, Sony generally uses its incremental borrowing rate, as the implicit rate is not available for most of its leases. Sony determines its incremental borrowing rate based on the estimated rate of interest for collateralized borrowings, taking into account the lease term and the economic conditions of each country or region at commencement date. The lease terms may include options to extend or terminate the lease when it is reasonably certain that Sony will exercise that option. If the lease transfers ownership of the underlying asset to the lessee by the end of the lease term or the purchase option is reasonably certain to be exercised, Sony depreciates the ROU assets from the commencement date to the end of the useful life of the underlying assets. Otherwise, Sony depreciates the ROU assets from the commencement date to the earlier of the end of the useful life of the ROU assets or the end of the lease term. Sony accounts for the lease and non-lease components as a single lease component. Sony has applied the short-term lease exception for leases with a term of one year or less, where ROU assets and lease liabilities are not recognized and the expense is recognized on a straight-line basis.
(9) | Intangible assets and amortization, including content assets - |
Intangible assets are measured using the cost model and stated at cost less accumulated amortization and impairment losses. Intangible assets acquired separately are initially recognized at cost.
Intangible assets with finite useful lives mainly consist of patent rights, know-how, license agreements, customer relationships, trademarks, software, television carriage contracts (broadcasting agreements), film costs, broadcasting rights, music catalogs, artist contracts and music distribution rights. Patent rights, know-how, license agreements, trademarks and software are generally amortized on a straight-line basis over three to 10 years. Customer relationships, television carriage contracts (broadcasting agreements), music catalogs, artist contracts and music distribution rights are generally amortized on a straight-line basis, over 10 to 44 years. Film costs are amortized using an ultimate revenue method based on the ratio of current period actual revenues to the estimated remaining total revenues. Sony considers that amortization pursuant to the ultimate revenue method reflects the rate at which it plans to consume the future economic benefits related to the asset, and there is a high correlation between revenue and the consumption of the economic benefits embodied in the intangible assets. Broadcasting rights are generally amortized based on estimated usage or on a straight-line basis over the useful life.
Amortization of intangible assets is included in cost of sales and selling, general and administrative expenses in the condensed consolidated statements of income. Certain intangible assets are assessed to have indefinite lives because there is no foreseeable limit to the period over which such assets are expected to generate net cash flows for Sony.
Film costs, broadcasting rights, music catalogs, artist contracts, music distribution rights and other content assets are collectively classified and presented as content assets in the condensed consolidated statements of financial position. Film costs include direct production costs, production overhead and acquisition costs for both motion picture and television productions. Broadcasting rights, consisting of acquired programming to be aired on Sony’s television and digital networks, are recognized when the license period begins and the program is available for use. Music catalogs are exclusive rights to the recorded music master or music copyrights, which consist of melodies and lyrics of songs, that can be exploited and marketed in various markets. Artist contracts are contracts with recorded music artists or songwriters that provide Sony with exclusive rights to musical works. Music distribution rights are agreements to distribute music content owned by third parties.
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(10) | Impairment of non-financial assets - |
Sony reviews the recoverability of its non-financial assets, except for inventories, contract costs and deferred tax assets, whenever there is any indication that an asset or a cash-generating unit (“CGU”) may be impaired. In addition, an annual impairment test for goodwill, intangible assets with indefinite useful lives or intangible assets not yet available for use is performed during the fourth quarter of the fiscal year for each CGU or group of CGUs to which the carrying amount of these assets is allocated.
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. Goodwill is allocated to each CGU or group of CGUs that is expected to benefit from the synergies of a business combination. A CGU or group of CGUs to which goodwill is allocated is not larger than an operating segment.
The recoverable amount of an asset, a CGU or group of CGUs is the higher of its value in use and fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. This approach uses significant estimates and assumptions, including estimated future cash flows, the timing of such cash flows, discount rates reflecting the risk inherent in future cash flows, perpetual growth rates, earnings multiples, the determination of appropriate comparable entities and the determination of whether a premium or discount should be applied to comparables. The assumptions used for estimated future cash flows and the timing of such cash flows for each CGU are generally based on the three-year mid-range plan (“MRP”) and take into account such factors as historical experience, market and industry information, and current and forecasted economic conditions. Perpetual growth rates are generally utilized to determine a terminal value and are generally set after the three-year forecasted period for the MRP.
If the recoverable amount is determined to be less than the carrying amount of a CGU or group of CGUs, an impairment loss would be recognized equal to the amount by which the carrying amount exceeds the recoverable amount. Such impairment losses are recognized first reducing the carrying amount of any allocated goodwill and then are allocated to the other assets of the CGU on a pro rata basis of the carrying amount of each asset in the CGU. Impairment losses except for content assets are included in other operating (income) expense, net, and impairment losses for content assets are included in cost of sales in the condensed consolidated statements of income.
Assets other than goodwill are reviewed to assess whether there is any indication that an impairment loss recognized in prior periods may no longer exist or may have decreased. If any such indication exists, the recoverable amount of the asset is determined and a reversal of an impairment loss is recognized when the recoverable amount of the asset exceeds the carrying amount. Any increased carrying amount of an asset attributable to the reversal of an impairment loss does not exceed the carrying amount, net of depreciation and amortization, which would have been determined if an impairment loss had never been recognized for the asset in prior periods.
(11) | Insurance-related accounts - |
In accordance with Sony’s first time adoption of IFRS 4 “Insurance contracts” (“IFRS 4”) on April 1, 2020, insurance contracts are recognized and measured according to the same accounting principles previously applied in generally accepted accounting principles in the United States (“U.S. GAAP”).
i) | Deferred insurance acquisition costs - |
Costs that vary with and are directly related to the acquisition or renewal of insurance policies are deferred as long as they are recoverable. The deferred insurance acquisition costs include such items as commissions, medical examination costs and inspection report fees, and are subject to recoverability testing at least annually to ensure that the capitalized amounts do not exceed the present value of anticipated gross profits or premiums less benefits and maintenance expenses, as applicable. The deferred insurance acquisition costs for traditional life insurance contracts are amortized over the premium-paying period of the related insurance policies using assumptions consistent with those used in computing future insurance policy benefits. The deferred insurance acquisition costs for non-traditional life insurance contracts are amortized over the expected life at a constant rate based on the present value of the estimated gross profit. Investment yields, mortality rates, lapse rates and discount rates are used as important assumptions for the present value of the estimated gross profit.
ii) | Future insurance policy benefits - |
Liabilities for future insurance policy benefits are primarily comprised of the present value of estimated future payments to policyholders. These liabilities are computed by the net level premium method based upon the assumptions as to future investment yield, morbidity rates, mortality rates, lapse rates and other factors. These assumptions are reviewed on a periodic basis. Liabilities for future policy benefits include the liabilities for the minimum guarantee benefits of variable annuities and variable life insurance contracts.
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iii) | Policyholders’ account in the life insurance business - |
Liabilities for policyholders’ account in the life insurance business represent the contract value that has accrued to the benefit of the policyholders as of the end of the reporting period. This liability is generally equal to the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balances. Liabilities for policyholders’ account in the life insurance business include the liabilities related to the variable annuities and variable life insurance contracts with minimum guarantee benefits.
iv) | Insurance-related accounts measured at fair value - |
Sony measures at fair value certain future insurance policy benefits and policyholders’ account in the life insurance business. The fair value measurement mitigates accounting mismatches related to the changes in the fair value between liabilities for those future insurance policy benefits and policyholders’ account due to changes in the minimum guarantee risk of contracts of variable annuities with minimum guarantee benefits, and the underlying investment managed for policyholders and derivatives entered into related to such investments. Changes in fair value resulting from changes in instrument-specific credit risk were estimated by incorporating the certain subsidiary’s current credit spreads, and are recognized in other comprehensive income, net of tax. The amount recognized in other comprehensive income is reclassified to profit or loss when the insurance contract liabilities are derecognized.
v) | Shadow accounting in the life insurance business - |
When holding financial assets that are measured at fair value through other comprehensive income and correspond to the 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 realized valuation gains or losses 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. In a shadow liability adequacy test, mainly, future insurance policy benefits minus deferred insurance acquisition costs in the statements of financial position are compared to the valuation of future cash flow on a best-estimate basis as of the end of reporting period to determine that the future insurance policy benefits are recorded at a sufficient level. If there is a shortage compared to the valuation of future cash flows on a best-estimate basis at the time, the deferred insurance acquisition costs will be decreased to the extent of the shortage through other comprehensive income. If the deferred insurance acquisition costs are decreased to zero and the shortage remains, the future insurance policy benefits are increased by the remaining shortage through other comprehensive income.
Shadow accounting is an accounting treatment that affects the measurement of the insurance-related accounts in response to unrealized gains or losses recognized for the assets in a manner consistent with realized gains or losses. When the gains or losses from the assets are recognized in other comprehensive income, the fluctuations in the carrying amount of insurance-related accounts are also recognized in other comprehensive income.
(12) | Provisions - |
Provisions are recognized when Sony has present legal or constructive obligations as a result of past events, it is probable that outflows of resources embodying economic benefits will be required to settle the obligations, and reliable estimates can be made of the amount of obligations.
Provisions mainly consist of participation and residual liabilities in the Pictures segment and product warranties.
i) | Participation and residual liabilities in the Pictures segment |
Parties involved in the production or exploitation of film and television content may be compensated in part by contingent payments based on the financial results of a film or television show pursuant to contractual formulas (participations) and by contingent amounts due under provisions of collective bargaining agreements (residuals). Such parties are collectively referred to as participants, and such costs are referred to collectively as participation and residual costs. Participation and residual costs may be given to creative talent, such as actors or writers, investors or to entities from whom distribution rights are licensed.
Participation and residual liabilities are accrued based on the ratio of current period actual revenues to the estimated remaining total revenues. The participation and residual liabilities are expected to be relieved when the contingent payments are fixed and paid. The majority of the non-current portion of participation and residual liabilities is expected to be paid within the next 10 years.
Sony also enters into arrangements with other studios to jointly produce and distribute films, under which each partner is responsible for the distribution of the film in specific territories or distribution windows. The partners’ shares in the profits and losses of the films under these arrangements are included within participation and residual costs.
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ii) | Product warranties |
Sony issues contractual product warranties under which it generally guarantees the performance of products delivered and services rendered for a certain period or term. The product warranty is calculated based upon product sales, estimated probability of failure and estimated cost per claim. The estimates and forecasts used in the calculation of the product warranty are reviewed on a periodic basis.
(13) | Employee benefits - |
i) | Post-employment benefits |
Sony adopts defined benefit plans and defined contribution plans.
Defined benefit plans
Sony recognizes the net defined benefit liability or asset of defined benefit plans in the condensed consolidated statements of financial position as the amount of the present value of defined benefit obligations less the fair value of plan assets.
The present value of defined benefit obligations is calculated by discounting the expected future benefit, and service costs are determined by using the projected unit credit method. 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 discount rate is determined by reference to market yields at each fiscal year-end on high-quality corporate bonds which have approximately the same term as the defined benefit obligations and are payable in the same currency as the benefit payments. Net interest on the net defined benefit liability or asset is calculated by multiplying the net defined benefit liability or asset by the discount rate.
Past service cost, which is the change in the present value of the defined benefit obligation resulting from a plan amendment or curtailment, is recognized in profit or loss.
Remeasurements of the net defined benefit liability or asset are recognized in other comprehensive income when they occur and transferred to retained earnings immediately.
Defined contribution plans
Sony recognizes contributions to defined contribution plans as expenses when employees have rendered related services.
ii) | Short-term employee benefits |
Sony recognizes short-term employee benefits, such as salaries, bonuses and annual paid absences, as expenses at the amount expected to be paid in exchange for services when employees have rendered such services.
(14) | Stock-based compensation - |
i) | Stock option plan |
Sony estimates the cost of stock options at their fair value on the grant date and recognizes the expense over the vesting period with a corresponding increase in equity. The fair value of options granted is calculated using the Black-Scholes option-pricing model with consideration for terms and conditions of the stock options.
ii) | Restricted stock plan |
Sony estimates the cost of restricted stock compensation by the fair value of the stock granted on the grant date and recognizes the expense over the vesting period with a corresponding increase in equity.
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(15) | Fair value measurement - |
Sony measures fair value as an exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.
Sony determines a hierarchy of inputs to valuation techniques based on the extent to which inputs used in measuring fair value are observable in the market. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect assumptions which Sony developed using the information that market participants would use in pricing the asset or liability. Observable market data is used if such data is available without undue cost and effort. Each fair value measurement is reported in one of three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety.
These levels are: | ||
Level 1 - | Inputs are unadjusted quoted prices for identical assets and liabilities in active markets. | |
Level 2 - | Inputs are based on observable inputs other than Level 1 prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets. | |
Level 3 - | One or more significant inputs are unobservable. |
When available, Sony uses unadjusted quoted market prices in active markets to measure fair value and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates and option volatilities. Items valued using internally generated models are classified according to the lowest level input that is significant to the valuation. For certain financial assets and liabilities, Sony determines fair value using third-party information such as indicative quotes from dealers and quantitative input from investment advisors following Sony’s established valuation procedures including validation against internally developed prices. Additionally, Sony considers both counterparty credit risk and Sony’s own creditworthiness in determining fair value. Sony attempts to mitigate credit risk to third parties by entering into netting agreements and actively monitoring the creditworthiness of counterparties and its exposure to credit risk through the use of credit limits and by selecting major international banks and financial institutions as counterparties.
Transfers between levels are deemed to have occurred at the beginning of the interim period in which the transfers occur.
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(16) | Revenue recognition - |
Sony recognizes revenue in an amount that reflects the consideration Sony expects in exchange for satisfying performance obligations to transfer the goods or services promised in contracts with customers. This is in accordance with the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) Sony satisfies a performance obligation.
Sony owns a variety of intellectual property throughout its segments and recognizes revenue through the licensing of such intellectual property. Sony licenses rights to use its intellectual property and rights to access its intellectual property. When Sony grants a customer the right to use Sony’s intellectual property, Sony satisfies its performance obligation at the point in time when the customer obtains control and is entitled to benefit from the license. When Sony grants a customer the right to access Sony’s intellectual property, Sony satisfies its performance obligation over the license period.
Incremental costs of obtaining a contract and costs to fulfill a contract are recognized as assets when Sony expects to recover these costs. The incremental costs of obtaining a contract are those costs that would not have been incurred if the contract had not been obtained. Costs to fulfill a contract are those costs that are directly related to a contract or to an anticipated contract and that generate or enhance resources for Sony to satisfy its performance obligations. Sony applies a practical expedient and recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would have been recognized is one year or less.
Performance obligations in contracts for the Electronics Products & Solutions (“EP&S”) and Imaging & Sensing Solutions (“I&SS”) segments are primarily to deliver various kinds of electronic equipment, instruments and devices to customers. Revenues from these performance obligations are generally recognized when a promised good is delivered to a customer. However, if the sales contract contains a customer acceptance provision, then revenues are recognized when the customer accepts the promised good or when a deemed acceptance occurs by the lapse of time. Revenues are also recognized over time, primarily from the provision of internet broadband network services to subscribers over the subscription period. Revenues are recognized net of anticipated returns and sales incentives.
Within the Game & Network Services (“G&NS”) segment, revenues from hardware, peripherals and software discs are recognized when performance obligations are satisfied by transferring control to the retailer/distributor, net of anticipated returns, sales incentives and cooperative advertising obligations. Revenues from platform licensing to publishers are recognized when physical software discs are delivered. Revenues from digital game content, which is a right to use Sony’s intellectual property, are recognized when the digital content is made available for use by the licensee via an online platform, net of anticipated sales incentives and credit card chargebacks. Revenues from digital game content involving multiple performance obligations, such as obligations to make content available on future dates, are allocated to each performance obligation based on the relative standalone selling prices that are observable in the market or Sony’s best estimate. Revenues from subscription fees for digital subscription services are recognized over the subscription period.
Within the Music segment, Sony licenses intellectual property that transfer to a customer either a right to use Sony’s intellectual property, or a right to access Sony’s intellectual property. Revenues are recognized when the customer has the right to use or access the intellectual property and obtains control of the use or access of that license. Digital revenues include revenues from contracts with digital streaming services typically recognized as a single performance obligation, which is ongoing access to intellectual property in an evolving library of content over the contract term, predicated on: (1) the business practice and contractual ability to remove specific content without a requirement to replace the content and without impact to minimum royalty guarantees and (2) the contracts not containing a specific listing of content subject to the license. For these contracts, revenues are recognized based on sales and usage royalties, except where there is a minimum royalty guarantee that is not expected to be recouped, or a fixed fee, which is recognized on a straight-line basis over the term of the contract. Revenues from the sale of physical products such as CDs, net of anticipated returns and sales incentives, are recognized when delivery has occurred and the product is available for sale to the public.
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Within the Pictures segment, revenues from the theatrical exhibition of motion pictures are recognized as the customer exhibits the film. Revenues from the licensing of motion picture and television programming for pay and free television exhibition and other markets are recognized when the product is available for use by the licensee. Revenues for motion picture and television program licensing arrangements involving multiple performance obligations, for example a fee for multiple titles, territories or availability dates, are allocated based on the relative standalone selling price of each performance obligation using Sony’s best estimate based on available information such as market conditions and internal pricing guidelines. Each individual motion picture or television programming product delivered generally represents a separate performance obligation. Licensing revenue associated with certain renewals or extensions of existing agreements for motion pictures and television programming is recognized when the licensee can use and benefit from the content under the renewal or extension. Licensing revenue associated with minimum guarantees for a right to access Sony’s intellectual property is recognized ratably over the license term. For home entertainment distribution, revenues from the sale of physical products such as DVDs and Blu-ray Disc™, net of anticipated returns and sales incentives, are recognized when delivery has occurred and the product is available for sale to the public. Revenues from electronic sell-through and video-on-demand are recognized when the product is made available for viewing via digital distribution platforms. Revenues from the sale of broadcast advertising are recognized when the advertisement is aired, and the performance obligation in these arrangements is the delivery of advertising spots and may include a guaranteed amount of impressions. When a guarantee for a number of impressions is not achieved, revenues are not recognized until additional advertising spots are delivered to provide the guaranteed impressions. Revenues from subscription fees received by television and digital networks are recognized when the service is provided. The performance obligation under network subscription arrangements is a right to use Sony’s intellectual property that is satisfied as programming is provided over the term of the arrangement.
Within the Financial Services segment, traditional life insurance policies that the life insurance subsidiary underwrites, most of which are categorized as long-duration contracts, mainly consist of whole life, term life and accident and health insurance contracts. Premiums from these policies are reported as revenue when due from policyholders. Amounts received as payment for non-traditional contracts such as interest sensitive whole life contracts, individual annuity contracts and other contracts without life contingencies are recognized in policyholders’ account in the life insurance business. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services, which are recognized over the period of the contracts, and included in financial services revenue. Property and casualty insurance policies that the non-life insurance subsidiary underwrites are primarily automotive insurance contracts which are categorized as short-duration contracts. Premiums from these policies are reported as revenue over the period of the contract in proportion to the amount of insurance protection provided.
Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.
(17) | Cost of sales - |
Costs classified as cost of sales relate to the producing and manufacturing of products and include items such as material cost, subcontractor cost, depreciation of property, plant and equipment, amortization of intangible assets including content assets, personnel expenses and research and development costs.
(18) | Research and development expenditures - |
Research and development expenditures include items such as salaries, personnel expenses and other direct and indirect expenses associated with research and product development. Development expenditures are capitalized only when technical feasibility is achieved, Sony has the intention, ability and sufficient resources to use or sell the outcome of the development, it is probable that the outcome will generate a future economic benefit, and the cost can be reliably measured. Capitalized development costs are measured as the sum of total expenditures for development upon achieving the foregoing conditions for capitalization until development is completed. Research expenditures and other development expenditures that do not meet the foregoing conditions are expensed as incurred and included in the cost of sales in the condensed consolidated statements of income.
(19) | Selling, general and administrative - |
Costs classified as selling expenses relate to promoting and selling products and include items such as advertising, promotion, shipping and warranty expenses. General and administrative expenses include operating items such as officers’ salaries, personnel expenses, depreciation of property, plant and equipment, office rental for sales, marketing and administrative divisions, loss allowance for trade receivables and amortization of intangible assets.
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(20) | Financial services expenses - |
Financial services expenses include a provision for policy reserves and amortization of deferred insurance acquisition costs, interest expenses in the banking business, and all other operating costs, such as personnel expenses, depreciation of property, plant and equipment, and office rental of subsidiaries, in the Financial Services segment.
(21) | Advertising costs - |
Advertising costs are expensed as incurred.
(22) | Shipping and handling costs - |
The majority of shipping and handling, warehousing and internal transfer costs for finished goods are included in selling, general and administrative expenses. An exception to this is in the Pictures segment where such costs 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 network are included in cost of sales, including inbound freight charges, purchasing and receiving costs, inspection costs and warehousing costs for raw materials and in-process inventory. Shipping and handling activities that occur after control of the related good transfers are treated as separate performance obligations. Amounts paid by customers for shipping and handling costs are included in net sales.
(23) | Income taxes - |
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. Income taxes are recognized in each interim period based on management’s estimate of the weighted average effective annual income tax rate expected for the full financial year.
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 in the condensed consolidated financial statements. Deferred tax liabilities include the liabilities being recognized for undistributed profits of subsidiaries and associates accounted for using the equity method 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 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 need to adjust deferred tax assets is assessed periodically with available evidence related to the realization 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 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 for all years subject to examinations based upon the evaluation of the facts, circumstances and information available at that reporting date.
(24) | 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.
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II. | 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 condensed consolidated financial statements but are not effective and have not yet been adopted by Sony as of June 30, 2021 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. 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 or Non-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 or non-current. The amendments will be effective for Sony as of April 1, 2023. The impact of the amendments on Sony’s results of operations and financial position is being evaluated.
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4. | Financial instruments |
(1) | 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 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 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.
Derivatives
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.
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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 June 30, 2021 is as follows:
Yen in millions | ||||||||||||||||||||||||||||||||
April 1, 2020 | ||||||||||||||||||||||||||||||||
Presentation in the condensed consolidated statements of financial position | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Investments and advances in the Financial Services segment (Current) | Other financial assets (Current) | Investments and advances in the Financial Services segment (Non-current) | Other financial assets (Non-current) | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Financial assets required to be measured at fair value through profit or loss (“FVPL”) | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
Japanese national government bonds | - | 162,708 | - | 162,708 | 4,505 | - | 158,203 | - | ||||||||||||||||||||||||
Japanese local government bonds | - | 600 | - | 600 | - | - | 600 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 9,395 | 30 | 9,425 | - | - | 9,395 | 30 | ||||||||||||||||||||||||
Foreign government bonds | 24,330 | 155,908 | - | 180,238 | 66 | - | 180,172 | - | ||||||||||||||||||||||||
Foreign corporate bonds | - | 32,157 | 683 | 32,840 | 7,903 | - | 24,254 | 683 | ||||||||||||||||||||||||
Securitized products | - | - | 5,787 | 5,787 | - | - | 5,787 | - | ||||||||||||||||||||||||
Investment funds | - | 483,613 | 27,791 | 511,404 | - | - | 503,608 | 7,796 | ||||||||||||||||||||||||
Equity securities | 958,414 | 9,757 | 2,937 | 971,108 | - | - | 884,480 | 86,628 | ||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||||||||||
Interest rate contracts | - | 1,604 | - | 1,604 | - | 53 | - | 1,551 | ||||||||||||||||||||||||
Foreign exchange contracts | 315 | 21,188 | - | 21,503 | - | 21,454 | - | 49 | ||||||||||||||||||||||||
Equity contracts | 604 | 18,281 | 4,081 | 22,966 | - | 22,966 | - | - | ||||||||||||||||||||||||
Other | 391 | - | - | 391 | - | 391 | - | - | ||||||||||||||||||||||||
Financial assets designated to be measured at FVPL | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
Japanese national government bonds | - | 51,664 | - | 51,664 | 10,011 | - | 41,653 | - | ||||||||||||||||||||||||
Japanese local government bonds | - | 28,604 | - | 28,604 | 6,822 | - | 21,782 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 22,227 | - | 22,227 | 2,607 | - | 19,620 | - | ||||||||||||||||||||||||
Foreign government bonds | - | 41,089 | - | 41,089 | 9,618 | - | 31,471 | - | ||||||||||||||||||||||||
Foreign corporate bonds | - | 103,159 | 546 | 103,705 | 19,798 | - | 83,907 | - | ||||||||||||||||||||||||
Financial assets required to be measured at fair value through other comprehensive income (“FVOCI”) | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
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 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 698,188 | 34,569 | 732,757 | 12,167 | - | 720,590 | - | ||||||||||||||||||||||||
Foreign government bonds | - | 1,298,020 | - | 1,298,020 | 1,517 | - | 1,296,400 | 103 | ||||||||||||||||||||||||
Foreign corporate bonds | - | 175,670 | 14,541 | 190,211 | 58,010 | - | 131,544 | 657 | ||||||||||||||||||||||||
Securitized products | - | 33,383 | 10,290 | 43,673 | - | - | 43,673 | - | ||||||||||||||||||||||||
Financial assets designated to be measured at FVOCI | ||||||||||||||||||||||||||||||||
Equity securities | 10,432 | - | 47,233 | 57,665 | - | - | 2,907 | 54,758 | ||||||||||||||||||||||||
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Total assets | 994,486 | 13,305,981 | 148,488 | 14,448,955 | 141,537 | 44,864 | 14,110,299 | 152,255 | ||||||||||||||||||||||||
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Presentation in the condensed consolidated statements of financial position | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Other financial liabilities (Current) | Other financial liabilities (Non-current) | |||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Financial liabilities required to be measured at FVPL | ||||||||||||||||||||||||||||||||
Derivative liabilities | ||||||||||||||||||||||||||||||||
Interest rate contracts | - | 17,679 | - | 17,679 | 483 | 17,196 | ||||||||||||||||||||||||||
Foreign exchange contracts | 226 | 16,110 | - | 16,336 | 14,581 | 1,755 | ||||||||||||||||||||||||||
Equity contracts | 1,476 | - | - | 1,476 | 1,476 | - | ||||||||||||||||||||||||||
Other | 375 | - | - | 375 | 375 | - | ||||||||||||||||||||||||||
Contingent consideration | - | - | 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 | ||||||||||||||||||||||||||
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Total liabilities | 2,077 | 33,789 | 13,433 | 49,299 | 19,555 | 29,744 | ||||||||||||||||||||||||||
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Yen in millions | ||||||||||||||||||||||||||||||||
March 31, 2021 | ||||||||||||||||||||||||||||||||
Presentation in the condensed consolidated statements of financial position | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Investments and advances in the Financial Services segment (Current) | Other financial assets (Current) | Investments and advances in the Financial Services segment (Non-current) | Other financial assets (Non-current) | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Financial assets required to be measured at FVPL | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
Japanese national government bonds | - | 168,281 | - | 168,281 | - | - | 168,281 | - | ||||||||||||||||||||||||
Japanese local government bonds | - | 600 | - | 600 | - | - | 600 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 14,386 | 62 | 14,448 | - | - | 14,386 | 62 | ||||||||||||||||||||||||
Foreign government bonds | 30,164 | 183,994 | - | 214,158 | - | - | 214,158 | - | ||||||||||||||||||||||||
Foreign corporate bonds | - | 21,297 | 213 | 21,510 | 5,434 | - | 15,863 | 213 | ||||||||||||||||||||||||
Securitized products | - | - | 6,142 | 6,142 | - | - | 6,142 | - | ||||||||||||||||||||||||
Investment funds | - | 564,447 | 37,254 | 601,701 | - | - | 592,305 | 9,396 | ||||||||||||||||||||||||
Equity securities | 1,555,620 | 22,290 | 3,172 | 1,581,082 | 13,425 | - | 1,384,672 | 182,985 | ||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||||||||||
Interest rate contracts | - | 12,788 | - | 12,788 | - | 50 | - | 12,738 | ||||||||||||||||||||||||
Foreign exchange contracts | 3 | 15,688 | - | 15,691 | - | 14,104 | - | 1,587 | ||||||||||||||||||||||||
Equity contracts | 241 | - | 10,176 | 10,417 | - | 5,278 | - | 5,139 | ||||||||||||||||||||||||
Other | 17 | - | - | 17 | - | 17 | - | - | ||||||||||||||||||||||||
Financial assets designated to be measured at FVPL | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
Japanese national government bonds | - | 65,988 | - | 65,988 | 21,021 | - | 44,967 | - | ||||||||||||||||||||||||
Japanese local government bonds | - | 26,724 | - | 26,724 | 12,088 | - | 14,636 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 16,422 | - | 16,422 | 12,483 | - | 3,939 | - | ||||||||||||||||||||||||
Foreign government bonds | - | 17,174 | - | 17,174 | - | - | 17,174 | - | ||||||||||||||||||||||||
Foreign corporate bonds | - | 169,006 | - | 169,006 | 24,700 | - | 144,306 | - | ||||||||||||||||||||||||
Financial assets required to be measured at FVOCI | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
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 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 723,335 | 93,288 | 816,623 | 12,497 | - | 804,126 | - | ||||||||||||||||||||||||
Foreign government bonds | - | 1,185,639 | - | 1,185,639 | - | - | 1,185,528 | 111 | ||||||||||||||||||||||||
Foreign corporate bonds | - | 195,992 | 18,066 | 214,058 | 88,412 | - | 125,243 | 403 | ||||||||||||||||||||||||
Securitized products | - | 44,105 | 9,402 | 53,507 | - | - | 53,507 | - | ||||||||||||||||||||||||
Other | - | 116 | - | 116 | - | - | 101 | 15 | ||||||||||||||||||||||||
Financial assets designated to be measured at FVOCI | ||||||||||||||||||||||||||||||||
Equity securities | 241,577 | - | 104,541 | 346,118 | - | - | 5,754 | 340,364 | ||||||||||||||||||||||||
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Total assets | 1,827,622 | 13,292,702 | 282,316 | 15,402,640 | 207,596 | 19,449 | 14,622,582 | 553,013 | ||||||||||||||||||||||||
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Presentation in the condensed consolidated statements of financial position | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Other financial liabilities (Current) | Other financial liabilities (Non-current) | |||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Financial liabilities required to be measured at FVPL | ||||||||||||||||||||||||||||||||
Derivative liabilities | ||||||||||||||||||||||||||||||||
Interest rate contracts | - | 14,962 | - | 14,962 | 694 | 14,268 | ||||||||||||||||||||||||||
Foreign exchange contracts | 128 | 20,105 | - | 20,233 | 20,233 | - | ||||||||||||||||||||||||||
Equity contracts | 986 | 4,171 | - | 5,157 | 5,157 | - | ||||||||||||||||||||||||||
Other | 2 | - | - | 2 | 2 | - | ||||||||||||||||||||||||||
Contingent consideration | - | - | 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 | ||||||||||||||||||||||||||
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Total liabilities | 1,116 | 39,238 | 14,340 | 54,694 | 33,062 | 21,632 | ||||||||||||||||||||||||||
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Yen in millions | ||||||||||||||||||||||||||||||||
June 30, 2021 | ||||||||||||||||||||||||||||||||
Presentation in the condensed consolidated statements of financial position | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Investments and advances in the Financial Services segment (Current) | Other financial assets (Current) | Investments and advances in the Financial Services segment (Non-current) | Other financial assets (Non-current) | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Financial assets required to be measured at FVPL | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
Japanese national government bonds | - | 364,400 | - | 364,400 | - | - | 364,400 | - | ||||||||||||||||||||||||
Japanese local government bonds | - | 600 | - | 600 | - | - | 600 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 15,418 | 63 | 15,481 | - | - | 15,418 | 63 | ||||||||||||||||||||||||
Foreign government bonds | 28,381 | 181,574 | - | 209,955 | - | - | 209,955 | - | ||||||||||||||||||||||||
Foreign corporate bonds | - | 5,196 | 213 | 5,409 | 3,196 | - | 2,000 | 213 | ||||||||||||||||||||||||
Securitized products | - | - | 5,352 | 5,352 | - | - | 5,352 | - | ||||||||||||||||||||||||
Investment funds | - | 375,775 | 38,804 | 414,579 | - | - | 402,651 | 11,928 | ||||||||||||||||||||||||
Equity securities | 1,666,005 | 18,635 | 3,264 | 1,687,904 | - | - | 1,503,451 | 184,453 | ||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||||||||||
Interest rate contracts | - | 8,904 | - | 8,904 | - | 31 | - | 8,873 | ||||||||||||||||||||||||
Foreign exchange contracts | - | 13,736 | - | 13,736 | - | 13,120 | - | 616 | ||||||||||||||||||||||||
Equity contracts | 1,300 | - | 16,663 | 17,963 | - | 6,607 | - | 11,356 | ||||||||||||||||||||||||
Other | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Financial assets designated to be measured at FVPL | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
Japanese national government bonds | - | 48,212 | - | 48,212 | 16,012 | - | 32,200 | - | ||||||||||||||||||||||||
Japanese local government bonds | - | 29,941 | - | 29,941 | 14,377 | - | 15,564 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 15,984 | - | 15,984 | 15,984 | - | - | - | ||||||||||||||||||||||||
Foreign government bonds | - | 16,898 | - | 16,898 | 1,352 | - | 15,546 | - | ||||||||||||||||||||||||
Foreign corporate bonds | - | 164,473 | - | 164,473 | 24,871 | - | 139,602 | - | ||||||||||||||||||||||||
Financial assets required to be measured at FVOCI | ||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||
Japanese national government bonds | - | 9,791,705 | - | 9,791,705 | - | - | 9,791,705 | - | ||||||||||||||||||||||||
Japanese local government bonds | - | 46,200 | - | 46,200 | 18,185 | - | 28,015 | - | ||||||||||||||||||||||||
Japanese corporate bonds | - | 738,987 | 124,715 | 863,702 | 11,186 | - | 852,516 | - | ||||||||||||||||||||||||
Foreign government bonds | - | 1,324,917 | - | 1,324,917 | - | - | 1,324,803 | 114 | ||||||||||||||||||||||||
Foreign corporate bonds | - | 210,266 | 14,056 | 224,322 | 75,229 | - | 148,691 | 402 | ||||||||||||||||||||||||
Securitized products | - | 30,374 | 5,665 | 36,039 | - | - | 36,039 | - | ||||||||||||||||||||||||
Other | - | 102 | - | 102 | 102 | - | - | - | ||||||||||||||||||||||||
Financial assets designated to be measured at FVOCI | ||||||||||||||||||||||||||||||||
Equity securities | 271,148 | - | 132,071 | 403,219 | - | - | 5,611 | 397,608 | ||||||||||||||||||||||||
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Total assets | 1,966,834 | 13,402,297 | 340,866 | 15,709,997 | 180,494 | 19,758 | 14,894,119 | 615,626 | ||||||||||||||||||||||||
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| |||||||||
Presentation in the condensed consolidated statements of financial position | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Other financial liabilities (Current) | Other financial liabilities (Non-current) | |||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Financial liabilities required to be measured at FVPL | ||||||||||||||||||||||||||||||||
Derivative liabilities | ||||||||||||||||||||||||||||||||
Interest rate contracts | - | 12,247 | - | 12,247 | 797 | 11,450 | ||||||||||||||||||||||||||
Foreign exchange contracts | - | 12,329 | - | 12,329 | 12,254 | 75 | ||||||||||||||||||||||||||
Equity contracts | 441 | 2,888 | - | 3,329 | 3,329 | - | ||||||||||||||||||||||||||
Contingent consideration | - | - | 12,146 | 12,146 | 1,203 | 10,943 | ||||||||||||||||||||||||||
Financial liabilities designated to be measured at FVPL | ||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests | - | - | 19,043 | 19,043 | 512 | 18,531 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total liabilities | 441 | 27,464 | 31,189 | 59,094 | 18,095 | 40,999 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers from Level 2 into Level 1 were 900 million yen and 822 million yen for the fiscal year ended March 31, 2021 and for the three months ended June 30, 2021, respectively, as quoted prices for certain debt securities became available in active markets. Transfers out of Level 1 to Level 2 were 904 million yen and 2,673 million yen for the fiscal year ended March 31, 2021 and for the three months ended June 30, 2021, respectively, as quoted prices for certain debt securities were not available in active markets.
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Table of Contents
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 pre-tax revaluation gains (losses) of the Spotify shares owned by Sony recognized in net income are included in financial income (expenses) in the condensed consolidated statements of income, net of costs to be paid to Sony’s artists and distributed labels.
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:
Valuation techinque(s) | Significant unobservable inputs | Range | ||||||||||||||||||
April 1, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||||||
Financial assets required to be measured at FVOCI | ||||||||||||||||||||
Debt securities | ||||||||||||||||||||
Japanese corporate bonds | Discounted cash flow | Credit spread * | 37bp-67bp | 27bp-65bp | 18bp-60bp | |||||||||||||||
Foreign corporate bonds | Discounted cash flow | Credit spread * | 40bp-280bp | 20bp-130bp | 20bp-130bp | |||||||||||||||
Securitized products | Discounted cash flow | Credit spread * | 110bp-150bp | 100bp-150bp | 130bp-140bp |
* bp = basis point
The fair value decreases (increases) by 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 three months ended June 30, 2020 and 2021 are as follows:
Yen in millions | ||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
Total gains (losses) *1 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Net income *2 | Other comprehensive income *3 | Purchases | Sales and settlements | Transfers into Level 3 *4 | Transfers out of Level 3 | Others | Ending balance | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||
Financial assets required to be measured at FVPL | ||||||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||||||
Japanese corporate bonds | 30 | - | - | - | - | - | - | - | 30 | |||||||||||||||||||||||||||
Foreign corporate bonds | 683 | - | - | - | - | - | - | - | 683 | |||||||||||||||||||||||||||
Securitized products | 5,787 | - | - | - | (479 | ) | - | - | - | 5,308 | ||||||||||||||||||||||||||
Investment funds | 27,791 | (651 | ) | (7 | ) | 1,028 | (846 | ) | - | - | - | 27,315 | ||||||||||||||||||||||||
Equity securities | 2,937 | 6 | 3 | 237 | - | - | - | - | 3,183 | |||||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||||||||||||||
Equity contracts | 4,081 | - | (41 | ) | - | - | - | - | - | 4,040 | ||||||||||||||||||||||||||
Financial assets designated to be measured at FVPL | ||||||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||||||
Foreign corporate bonds | 546 | (5 | ) | - | - | - | - | - | - | 541 | ||||||||||||||||||||||||||
Financial assets required to be measured at FVOCI | ||||||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||||||
Japanese corporate bonds | 34,569 | - | (3,891 | ) | 36,000 | - | - | - | - | 66,678 | ||||||||||||||||||||||||||
Foreign corporate bonds | 14,541 | (67 | ) | 346 | 4,000 | (1,720 | ) | 4,543 | - | - | 21,643 | |||||||||||||||||||||||||
Securitized products | 10,290 | 294 | 11 | - | (985 | ) | - | - | - | 9,610 | ||||||||||||||||||||||||||
Financial assets designated to be measured at FVOCI | ||||||||||||||||||||||||||||||||||||
Equity securities | 47,233 | - | 6,012 | 1,048 | (390 | ) | - | - | 744 | 54,647 | ||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||
Financial liabilities required to be measured at FVPL | ||||||||||||||||||||||||||||||||||||
Contingent consideration | 5,666 | - | (44 | ) | 542 | - | - | - | - | 6,164 | ||||||||||||||||||||||||||
Financial liabilities designated to be measured at FVPL | ||||||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests | 7,767 | 803 | 67 | 1,279 | - | - | - | - | 9,916 |
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Table of Contents
Yen in millions | ||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||
Total gains (losses) *1 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Net income *2 | Other comprehensive income *3 | Purchases | Sales and settlements | Transfers into Level 3 *4 | Transfers out of Level 3 | Others | Ending balance | ||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||
Financial assets required to be measured at FVPL | ||||||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||||||
Japanese corporate bonds | 62 | - | - | 1 | - | - | - | - | 63 | |||||||||||||||||||||||||||
Foreign corporate bonds | 213 | - | - | - | - | - | - | - | 213 | |||||||||||||||||||||||||||
Securitized products | 6,142 | - | - | - | (790 | ) | - | - | - | 5,352 | ||||||||||||||||||||||||||
Investment funds | 37,254 | 722 | - | 4,473 | (3,645 | ) | - | - | - | 38,804 | ||||||||||||||||||||||||||
Equity securities | 3,172 | 13 | 5 | 74 | - | - | - | - | 3,264 | |||||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||||||||||||||
Equity contracts | 10,176 | 6,436 | 51 | - | - | - | - | - | 16,663 | |||||||||||||||||||||||||||
Financial assets required to be measured at FVOCI | ||||||||||||||||||||||||||||||||||||
Debt securities | ||||||||||||||||||||||||||||||||||||
Japanese corporate bonds | 93,288 | - | (2,919 | ) | 34,346 | - | - | - | - | 124,715 | ||||||||||||||||||||||||||
Foreign corporate bonds | 18,066 | - | (6 | ) | - | (4,000 | ) | - | - | (4 | ) | 14,056 | ||||||||||||||||||||||||
Securitized products | 9,402 | (46 | ) | 46 | - | (3,737 | ) | - | - | - | 5,665 | |||||||||||||||||||||||||
Financial assets designated to be measured at FVOCI | ||||||||||||||||||||||||||||||||||||
Equity securities | 104,541 | - | 3,575 | 24,038 | (110 | ) | 23 | - | 4 | 132,071 | ||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||
Financial liability required to be measured at FVPL | ||||||||||||||||||||||||||||||||||||
Contingent consideration | 6,161 | 267 | 38 | 6,733 | (1,057 | ) | - | - | 4 | 12,146 | ||||||||||||||||||||||||||
Financial liability designated to be measured at FVPL | ||||||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests | 8,179 | 119 | (101 | ) | 15,534 | (4,688 | ) | - | - | - | 19,043 |
*1 | For liability items, gains presented as negative and losses presented as positive. |
*2 | Gains (losses) recognized in net income are included in financial services revenue, financial income and financial expenses in the condensed consolidated statements of income. |
*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 condensed consolidated statements of comprehensive income. |
*4 | Certain debt securities and equity securities were transferred into 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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Table of Contents
The changes in unrealized gains (losses) recognized in net income for Level 3 assets and liabilities held as of June 30, 2020 and 2021 are as follows:
Yen in millions | ||||||||
Three months ended June 30 | ||||||||
2020 | 2021 | |||||||
Assets: | ||||||||
Financial assets required to be measured at FVPL | ||||||||
Debt securities | ||||||||
Investment funds | (710 | ) | 161 | |||||
Equity securities | 6 | 13 | ||||||
Derivative assets | ||||||||
Equity contracts | - | 6,436 | ||||||
Financial assets designated to be measured at FVPL | ||||||||
Debt securities | ||||||||
Foreign corporate bonds | (5 | ) | - | |||||
Financial assets required to be measured at FVOCI | ||||||||
Debt securities | ||||||||
Foreign corporate bonds | (67 | ) | - | |||||
Securitized products | 294 | (86 | ) | |||||
Liabilities: | ||||||||
Financial liability required to be measured at FVPL | ||||||||
Contingent consideration | - | (241 | ) | |||||
Financial liability designated to be measured at FVPL | ||||||||
Redeemable noncontrolling interests | (803 | ) | (119 | ) |
* | Gains (losses) recognized in net income are included in financial services revenue, financial income and financial expenses in the condensed consolidated statements of income. |
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Table of Contents
(2) | 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 June 30, 2021 are summarized as follows:
Yen in millions | ||||||||||||||||||||
April 1, 2020 | ||||||||||||||||||||
Fair value | Carrying amount | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Total | ||||||||||||||||
Assets: | ||||||||||||||||||||
Debt securities | ||||||||||||||||||||
Japanese national government bonds | - | 94,062 | - | 94,062 | 72,064 | |||||||||||||||
Japanese local government bonds | - | 2,835 | - | 2,835 | 2,503 | |||||||||||||||
Japanese corporate bonds | - | 4,166 | - | 4,166 | 3,634 | |||||||||||||||
Foreign corporate bonds | - | 105 | - | 105 | 98 | |||||||||||||||
Securitized products | - | - | 160,760 | 160,760 | 174,772 | |||||||||||||||
Other | - | 41 | 2,335 | 2,376 | 2,376 | |||||||||||||||
Housing loans in the banking business | - | 2,161,432 | - | 2,161,432 | 1,919,219 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total assets | - | 2,262,641 | 163,095 | 2,425,736 | 2,174,666 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities: | ||||||||||||||||||||
Long-term debt including the current portion | - | 605,444 | 25,401 | 630,845 | 631,716 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total liabilities | - | 605,444 | 25,401 | 630,845 | 631,716 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions | ||||||||||||||||||||
March 31, 2021 | ||||||||||||||||||||
Fair value | Carrying amount | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Total | ||||||||||||||||
Assets: | ||||||||||||||||||||
Debt securities | ||||||||||||||||||||
Japanese national government bonds | - | 87,705 | - | 87,705 | 71,420 | |||||||||||||||
Japanese local government bonds | - | 2,010 | - | 2,010 | 1,716 | |||||||||||||||
Japanese corporate bonds | - | 3,883 | - | 3,883 | 3,537 | |||||||||||||||
Foreign corporate bonds | - | 6,032 | - | 6,032 | 5,907 | |||||||||||||||
Securitized products | - | - | 211,229 | 211,229 | 211,271 | |||||||||||||||
Other | - | 41 | 4,902 | 4,943 | 4,943 | |||||||||||||||
Housing loans in the banking business | - | - | 2,559,073 | 2,559,073 | 2,342,728 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total assets | - | 99,671 | 2,775,204 | 2,874,875 | 2,641,522 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Liabilities: | ||||||||||||||||||||
Long-term debt including the current portion | - | �� | 794,479 | 55,451 | 849,930 | 857,019 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total liabilities | - | 794,479 | 55,451 | 849,930 | 857,019 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 52 -
Table of Contents
Yen in millions | ||||||||||||||||||||
June 30, 2021 | ||||||||||||||||||||
Fair value | Carrying amount | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Total | ||||||||||||||||
Assets: | ||||||||||||||||||||
Debt securities | ||||||||||||||||||||
Japanese national government bonds | - | 88,006 | - | 88,006 | 72,369 | |||||||||||||||
Japanese local government bonds | - | 2,006 | - | 2,006 | 1,716 | |||||||||||||||
Japanese corporate bonds | - | 3,954 | - | 3,954 | 3,636 | |||||||||||||||
Foreign corporate bonds | - | 6,044 | - | 6,044 | 5,925 | |||||||||||||||
Securitized products | - | - | 212,221 | 212,221 | 212,300 | |||||||||||||||
Other | - | 56 | 4,902 | 4,958 | 4,958 | |||||||||||||||
Housing loans in the banking business | - | - | 2,629,371 | 2,629,371 | 2,463,997 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | - | 100,066 | 2,846,494 | 2,946,560 | 2,764,901 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities: | ||||||||||||||||||||
Long-term debt including the current portion | - | 775,198 | 55,828 | 831,026 | 837,483 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | - | 775,198 | 55,828 | 831,026 | 837,483 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
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 the 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 into Level 3 occurred primarily due to increases in the significance of unobservable inputs during the fiscal year ended March 31, 2021.
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Table of Contents
5. | Insurance-related accounts measured at fair value |
The fair value of future insurance policy benefits and policyholders’ account in the life insurance business measured at fair value as of April 1, 2020, March 31, 2021 and June 30, 2021 is as follows. These are classified within Level 3 of the fair value hierarchy since Sony primarily uses unobservable inputs in its valuation.
Yen in millions | ||||||||||||
Presentation in the condensed consolidated statements of financial position | ||||||||||||
Fair value | Future insurance policy benefits and other | Policyholders’ account in the life insurance business | ||||||||||
April 1, 2020 | 532,191 | 64,045 | 468,146 | |||||||||
March 31, 2021 | 536,189 | 42,309 | 493,880 | |||||||||
June 30, 2021 | 531,318 | 39,628 | 491,690 |
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 measured at fair value as of April 1, 2020, March 31, 2021 and June 30, 2021 are as follows:
Valuation techniques | Significant unobservable inputs | Range | ||||||||||||||
April 1, 2020 | March 31, 2021 | June 30, 2021 | ||||||||||||||
Present value of future expected cash flows | Credit spread | * | 64.4bp | 37.9bp | 42.2bp | |||||||||||
Mortality rates | 0.004%-44.865% | 0.004%-44.865% | 0.003%-32.901% | |||||||||||||
Lapse rates | 1.000%-7.500% | 1.000%-7.500% | 1.000%-7.500% |
* bp | = basis point |
The fair value decreases (increases) by 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.
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Table of Contents
The changes in fair value of future insurance policy benefits and policyholders’ account in the life insurance business measured at fair value for the three months ended June 30, 2020 and 2021 are as follows:
Yen in millions | Yen in millions | |||||||
Three months ended June 30, 2020 | Three months ended June 30, 2021 | |||||||
Beginning balance | 532,191 | 536,189 | ||||||
Total gains (losses) *1: | ||||||||
Included in net income *2 | 8,480 | 2,735 | ||||||
Included in other comprehensive income *3 | 1,650 | (361 | ) | |||||
Issuances | 1,182 | - | ||||||
Settlements | (2,220 | ) | (7,245 | ) | ||||
|
|
|
| |||||
Ending balance | 541,283 | 531,318 | ||||||
|
|
|
| |||||
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 | (11,626 | ) | (5,986 | ) |
*1 | Gains presented as negative and losses presented as positive. |
*2 | Included in financial services revenue and financial services expenses in the condensed consolidated statements of income. |
*3 | Included in insurance contract valuation adjustments in the condensed consolidated statements of comprehensive income. |
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Table of Contents
6. | Stockholders’ equity |
Supplemental comprehensive income information
Changes in accumulated other comprehensive income, net of tax, by component for the three months ended June 30, 2020 and 2021 were as follows:
Yen in millions | ||||||||||||||||
Balance at April 1, 2020 | Comprehensive income attributable to Sony Group Corporation’s stockholders | Transfer to retained earnings | Balance at June 30, 2020 | |||||||||||||
Changes in equity instruments measured at fair value through other comprehensive income | (8,882 | ) | 39,872 | (204 | ) | 30,786 | ||||||||||
Changes in debt instruments measured at fair value through other comprehensive income | 985,234 | (44,134 | ) | - | 941,100 | |||||||||||
Cash flow hedges | 1,248 | (260 | ) | - | 988 | |||||||||||
Remeasurement of defined benefit pension plans | - | (28 | ) | 28 | - | |||||||||||
Exchange differences on translating foreign operations | - | 2,215 | - | 2,215 | ||||||||||||
Insurance contract valuation adjustments | 1,973 | (1,074 | ) | - | 899 | |||||||||||
Share of other comprehensive income of investments accounted for using the equity method | (97 | ) | (31 | ) | (2 | ) | (130 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 979,476 | (3,440 | ) | (178 | ) | 975,858 | ||||||||||
|
|
|
|
|
|
|
|
Yen in millions | ||||||||||||||||
Balance at April 1, 2021 | Comprehensive income attributable to Sony Group Corporation’s stockholders | Transfer to retained earnings | Balance at June 30, 2021 | |||||||||||||
Changes in equity instruments measured at fair value through other comprehensive income | 139,622 | 26,370 | 1 | 165,993 | ||||||||||||
Changes in debt instruments measured at fair value through other comprehensive income | 1,264,737 | 34,994 | - | 1,299,731 | ||||||||||||
Cash flow hedges | 1,299 | (198 | ) | - | 1,101 | |||||||||||
Remeasurement of defined benefit pension plans | - | (1,697 | ) | 1,697 | - | |||||||||||
Exchange differences on translating foreign operations | 113,901 | 6,811 | - | 120,712 | ||||||||||||
Insurance contract valuation adjustments | (88 | ) | 284 | - | 196 | |||||||||||
Share of other comprehensive income of investments accounted for using the equity method | 786 | (44 | ) | - | 742 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 1,520,257 | 66,520 | 1,698 | 1,588,475 | ||||||||||||
|
|
|
|
|
|
|
|
- 56 -
Table of Contents
7. | Revenue |
For the breakdown of sales and financial services revenue by segments, product categories and geographies, refer to Note 10.
8. | Reconciliation of the differences between basic and diluted EPS |
Reconciliation of the differences between basic and diluted EPS for the three months ended June 30, 2020 and 2021 is as follows:
Yen in millions | ||||
Three months ended June 30 | ||||
2020 | 2021 | |||
Net income attributable to Sony Group Corporation’s stockholders | 193,583 | 211,829 | ||
Adjustment amount to net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation | ||||
Zero coupon convertible bonds | 149 | 51 | ||
|
| |||
Net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation | 193,732 | 211,880 | ||
|
| |||
Thousands of shares | ||||
Weighted-average shares outstanding for basic EPS computation | 1,220,629 | 1,239,162 | ||
Effect of dilutive securities: | ||||
Stock acquisition rights | 3,269 | 4,914 | ||
Zero coupon convertible bonds | 23,820 | 8,046 | ||
|
| |||
Weighted-average shares for diluted EPS computation | 1,247,718 | 1,252,122 | ||
|
| |||
Yen | ||||
Basic EPS | 158.59 | 170.95 | ||
|
| |||
Diluted EPS | 155.27 | 169.22 | ||
|
|
Potential shares of common stock which were excluded from the computation of diluted EPS for the three months ended June 30, 2020 were 3,232 thousand shares. Potential shares of common stock were not excluded from the computation of diluted EPS for the three months ended June 30, 2021. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the three months ended June 30, 2020 when the exercise price for those shares was in excess of the average market value of Sony Group Corporation’s common stock for the period.
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Table of Contents
9. | Purchase commitments, contingent liabilities and other |
(1) | Loan commitments |
Subsidiaries in the Financial Services segment have lines of credit in accordance with loan agreements with their customers. As of April 1, 2020, March 31, 2021 and June 30, 2021, the total unused portion of the lines of credit extended under these contracts was 34,306 million yen, 37,322 million yen, and 29,678 million yen, respectively. Based upon the information currently available, it is not possible to estimate the aggregate amounts of future year-by-year payments for these loan commitments.
(2) | Purchase commitments |
Purchase commitments as of April 1, 2020, March 31, 2021 and June 30, 2021 amounted to 680,739 million yen, 629,474 million yen and 654,357 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 purchase 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, March 31, 2021 and June 30, 2021, these subsidiaries were committed to make payments under such contracts of 126,917 million yen, 105,921 million yen and 101,755 million yen, respectively.
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 April 1, 2020, March 31, 2021 and June 30, 2021, these subsidiaries were committed to make payments of 128,678 million yen, 149,021 million yen and 143,779 million yen, respectively under such contracts.
Certain subsidiaries in the Game & Network Services (“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 to eight years from the end of each period. As of April 1, 2020, March 31, 2021 and June 30, 2021, these subsidiaries were committed to make payments of 29,243 million yen, 32,959 million yen and 29,786 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, March 31, 2021 and June 30, 2021, Sony has committed to make payments of 199,145 million yen, 135,297 million yen and 132,047 million yen, respectively under such contracts.
Sony has entered into purchase contracts for materials. As of April 1, 2020, March 31, 2021 and June 30, 2021, Sony has committed to make payments of 115,670 million yen, 96,589 million yen and 88,486 million yen, respectively under such contracts.
(3) | Litigation |
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.
(4) | Guarantees |
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, March 31, 2021 and June 30, 2021 amounted to 2,214 million yen, 529 million yen and 559 million yen, respectively.
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10. | Business segment information |
The reportable segments presented below are the segments of Sony for which separate financial information is available and for which operating profit 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 ending 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, 2021 are presented to conform to the organizational structure for the fiscal year ending March 31, 2022.
The G&NS segment includes 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 internet-related service business. The I&SS segment includes the image sensors business. The Financial Services segment primarily represents individual life insurance and non-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.
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Segment sales and financial services revenue:
Yen in millions | ||||||||
Three months ended June 30 | ||||||||
| 2020 | 2021 | ||||||
Sales and financial services revenue: | ||||||||
Game & Network Services - | ||||||||
Customers | 599,049 | 602,158 | ||||||
Intersegment | 7,060 | 13,652 | ||||||
|
|
|
| |||||
Total | 606,109 | 615,810 | ||||||
Music - | ||||||||
Customers | 173,735 | 252,222 | ||||||
Intersegment | 3,380 | 2,651 | ||||||
|
|
|
| |||||
Total | 177,115 | 254,873 | ||||||
Pictures - | ||||||||
Customers | 174,441 | 204,378 | ||||||
Intersegment | 648 | 358 | ||||||
|
|
|
| |||||
Total | 175,089 | 204,736 | ||||||
Electronics Products & Solutions - | ||||||||
Customers | 354,012 | 566,519 | ||||||
Intersegment | 7,365 | 9,749 | ||||||
|
|
|
| |||||
Total | 361,377 | 576,268 | ||||||
Imaging & Sensing Solutions - | ||||||||
Customers | 198,371 | 197,885 | ||||||
Intersegment | 7,815 | 20,172 | ||||||
|
|
|
| |||||
Total | 206,186 | 218,057 | ||||||
Financial Services - | ||||||||
Customers | 437,989 | 412,130 | ||||||
Intersegment | 2,255 | 2,255 | ||||||
|
|
|
| |||||
Total | 440,244 | 414,385 | ||||||
All Other - | ||||||||
Customers | 20,445 | 18,217 | ||||||
Intersegment | 4,855 | 3,769 | ||||||
|
|
|
| |||||
Total | 25,300 | 21,986 | ||||||
Corporate and elimination | (28,471 | ) | (49,272 | ) | ||||
|
|
|
| |||||
Consolidated total | 1,962,949 | 2,256,843 | ||||||
|
|
|
|
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.
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Segment profit (loss):
Yen in millions | ||||||||
Three months ended June 30 | ||||||||
| 2020 | 2021 | ||||||
Operating income (loss): | ||||||||
Game & Network Services | 123,900 | 83,259 | ||||||
Music | 35,637 | 55,380 | ||||||
Pictures | 27,044 | 25,354 | ||||||
Electronics Products & Solutions | (8,857 | ) | 71,751 | |||||
Imaging & Sensing Solutions | 26,209 | 30,479 | ||||||
Financial Services | 35,989 | 24,013 | ||||||
All Other | 3,520 | 4,154 | ||||||
|
|
|
| |||||
Total | 243,442 | 294,390 | ||||||
Corporate and elimination | (21,717 | ) | (14,322 | ) | ||||
|
|
|
| |||||
Consolidated operating income | 221,725 | 280,068 | ||||||
|
|
|
| |||||
Financial income | 56,676 | 11,685 | ||||||
Financial expenses | (9,839 | ) | (8,543 | ) | ||||
|
|
|
| |||||
Consolidated income before income taxes | 268,562 | 283,210 | ||||||
|
|
|
|
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.
Other significant items:
Yen in millions | ||||||||
Three months ended June 30 | ||||||||
| 2020 | 2021 | ||||||
Share of profit (loss) of investments accounted for using the equity method: | ||||||||
Game & Network Services | - | (8 | ) | |||||
Music | (1,738 | ) | (647 | ) | ||||
Pictures | 22 | 102 | ||||||
Electronics Products & Solutions | (10 | ) | 95 | |||||
Imaging & Sensing Solutions | (94 | ) | 148 | |||||
Financial Services | - | - | ||||||
All Other | 1,518 | 4,578 | ||||||
|
|
|
| |||||
Consolidated total | (302 | ) | 4,268 | |||||
|
|
|
| |||||
Depreciation and amortization: | ||||||||
Game & Network Services | 12,059 | 14,239 | ||||||
Music | 11,137 | 13,968 | ||||||
Pictures | 63,443 | 73,190 | ||||||
Electronics Products & Solutions | 19,962 | 22,531 | ||||||
Imaging & Sensing Solutions | 41,074 | 41,252 | ||||||
Financial Services, including deferred insurance acquisition costs | 11,191 | 21,285 | ||||||
All Other | 1,774 | 1,072 | ||||||
|
|
|
| |||||
Total | 160,640 | 187,537 | ||||||
Corporate | 6,307 | 5,427 | ||||||
|
|
|
| |||||
Consolidated total | 166,947 | 192,964 | ||||||
|
|
|
|
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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.
Yen in millions | ||||||||
Three months ended June 30 | ||||||||
Sales and financial services revenue: | 2020 | 2021 | ||||||
Game & Network Services | ||||||||
Digital Software and Add-on Content | 394,637 | 320,436 | ||||||
Network Services | 93,295 | 101,986 | ||||||
Hardware and Others | 111,117 | 179,736 | ||||||
|
|
|
|
| ||||
Total | 599,049 | 602,158 | ||||||
Music | ||||||||
Recorded Music – Streaming | 68,900 | 109,109 | ||||||
Recorded Music – Others | 29,186 | 42,780 | ||||||
Music Publishing | 31,096 | 47,132 | ||||||
Visual Media and Platform | 44,553 | 53,201 | ||||||
|
|
|
|
| ||||
Total | 173,735 | 252,222 | ||||||
Pictures | ||||||||
Motion Pictures | 65,077 | 79,503 | ||||||
Television Productions | 64,303 | 61,288 | ||||||
Media Networks | 45,061 | 63,587 | ||||||
|
|
|
|
| ||||
Total | 174,441 | 204,378 | ||||||
Electronics Products & Solutions | ||||||||
Televisions | 106,568 | 221,021 | ||||||
Audio and Video | 47,081 | 73,089 | ||||||
Still and Video Cameras | 46,405 | 116,410 | ||||||
Mobile Communications | 94,229 | 81,413 | ||||||
Other | 59,729 | 74,586 | ||||||
|
|
|
|
| ||||
Total | 354,012 | 566,519 | ||||||
Imaging & Sensing Solutions | 198,371 | 197,885 | ||||||
Financial Services | 437,989 | 412,130 | ||||||
All Other | 20,445 | 18,217 | ||||||
Corporate | 4,907 | 3,334 | ||||||
|
|
|
|
| ||||
Consolidated total | 1,962,949 | 2,256,843 | ||||||
|
|
|
|
In the G&NS segment, Digital Software and Add-on Content includes distribution of software titles and add-on content through 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, including game applications based on the animation titles, 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 includes Blu-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 broadcast; Mobile Communications includes smartphones and an internet-related service business; Other includes display products such as projectors and medical equipment.
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Geographic Information:
Sales and financial services revenue attributed to countries and areas based on location of external customers for the three months ended June 30, 2020 and 2021 are as follows:
Yen in millions | ||||||||
Three months ended June 30 | ||||||||
Sales and financial services revenue: | 2020 | 2021 | ||||||
Japan | 723,623 | 701,915 | ||||||
United States | 464,616 | 603,103 | ||||||
Europe | 361,959 | 410,724 | ||||||
China | 179,579 | 183,543 | ||||||
Asia-Pacific | 142,729 | 222,938 | ||||||
Other Areas | 90,443 | 134,620 | ||||||
|
|
|
|
| ||||
Total | 1,962,949 | 2,256,843 | ||||||
|
|
|
|
Major countries and areas in each geographic segment excluding Japan, United States and China are as follows:
(1) Europe: | United Kingdom, France, Germany, Russia, Spain and Sweden | |
(2) Asia-Pacific: | India, South Korea and Oceania | |
(3) Other Areas: | The Middle East/Africa, Brazil, Mexico and Canada |
There are no individually material countries with respect to sales and financial services revenue 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 and financial services revenue with any single major external customer for the three months ended June 30, 2020 and 2021.
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11. | First-time adoption |
Sony has disclosed its condensed consolidated financial statements under IFRS from the first quarter of the fiscal year ending 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.
(1) Exemption under IFRS 1
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:
Business combinations
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.
(2) 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.
(3) Reconciliation
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.
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Reconciliation of equity at the date of transition to IFRS (April 1, 2020)
Accounts under U.S. GAAP |
| Yen in millions | Accounts under IFRS | |||||||||||||||||||
U.S. GAAP* | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||||
ASSETS | ASSETS | |||||||||||||||||||||
Current assets: | Current assets: | |||||||||||||||||||||
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 | |||||||||||||||
Total current assets | 5,703,306 | (1,534,376 | ) | 2,254 | 4,171,184 | Total current assets | ||||||||||||||||
Non-current assets: | ||||||||||||||||||||||
Film costs | 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 | |||||||||||||||||
Other assets: | ||||||||||||||||||||||
Operating lease right-of-use assets | 359,510 | (359,510 | ) | - | - | g | ||||||||||||||||
Finance lease right-of-use assets | 33,100 | (33,100 | ) | - | - | g | ||||||||||||||||
- | 376,998 | (3,716 | ) | 373,282 | g | Right-of-use 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 | 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 | ||||||||||||||||||
Total assets | 23,032,784 | (8,138 | ) | 1,942,420 | 24,967,066 | Total assets |
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Accounts under U.S. GAAP |
| Yen in millions | Accounts under IFRS | |||||||||||||||||||
U.S. GAAP* | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||||
LIABILITIES | LIABILITIES | |||||||||||||||||||||
Current liabilities: | Current liabilities: | |||||||||||||||||||||
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 | |||||||||||||||
Non-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 | 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 | Total non-current liabilities | ||||||||||||||||||
Total liabilities | 18,240,537 | (371 | ) | 732,424 | 18,972,590 | Total liabilities | ||||||||||||||||
Redeemable noncontrolling interest | 7,767 | (7,767 | ) | - | - | o | ||||||||||||||||
EQUITY | EQUITY | |||||||||||||||||||||
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 | A,B,D E,F | 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 | ||||||||||||||||
Total equity | 4,784,480 | - | 1,209,996 | 5,994,476 | Total equity | |||||||||||||||||
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 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.
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Reconciliation of equity as of June 30, 2020
Accounts under U.S. GAAP |
| Yen in millions | Accounts under IFRS | |||||||||||||||||||
U.S. GAAP | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||||
ASSETS | ASSETS | |||||||||||||||||||||
Current assets: | Current assets: | |||||||||||||||||||||
Cash and cash equivalents | 1,448,614 | - | 295 | 1,448,909 | Cash and cash equivalents | |||||||||||||||||
Marketable securities | 2,105,977 | (2,105,977 | ) | - | - | a | ||||||||||||||||
- | 378,857 | 7 | 378,864 | a,f | Investments and advances in the Financial Services segment | |||||||||||||||||
Notes and accounts receivable, trade and contract assets | 1,005,429 | (1,005,429 | ) | - | - | b | ||||||||||||||||
- | 1,194,949 | (1,081 | ) | 1,193,868 | b,c | Trade and other receivables, and contract assets | ||||||||||||||||
Allowance for credit losses | (26,060 | ) | 26,060 | - | - | b | ||||||||||||||||
Inventories | 588,797 | - | (273 | ) | 588,524 | Inventories | ||||||||||||||||
Other receivables | 179,568 | (179,568 | ) | - | - | c | ||||||||||||||||
- | 106,594 | 217 | 106,811 | d | Other financial assets | |||||||||||||||||
Prepaid expenses and other current assets | 608,271 | (153,041 | ) | (5,244 | ) | 449,986 | d | Other current assets | ||||||||||||||
Total current assets | 5,910,596 | (1,737,555 | ) | (6,079 | ) | 4,166,962 | Total current assets | |||||||||||||||
Non-current assets: | ||||||||||||||||||||||
Film costs | 417,646 | (417,646 | ) | - | - | e | ||||||||||||||||
Investments and advances: | ||||||||||||||||||||||
Affiliated companies | 210,800 | (666 | ) | (2,727 | ) | 207,407 | Investments accounted for using the equity method | |||||||||||||||
Securities investments and other | 12,937,934 | (12,937,934 | ) | - | - | f | ||||||||||||||||
Allowance for credit losses | (7,677 | ) | 7,677 | - | - | |||||||||||||||||
- | 14,357,344 | 2,099,941 | 16,457,285 | a,f,D | Investments and advances in the Financial Services segment | |||||||||||||||||
Property, plant and equipment: | ||||||||||||||||||||||
Land | 79,860 | (79,860 | ) | - | - | |||||||||||||||||
Buildings | 658,911 | (658,911 | ) | - | - | |||||||||||||||||
Machinery and equipment | 1,792,832 | (1,792,832 | ) | - | - | |||||||||||||||||
Construction in progress | 71,599 | (71,599 | ) | - | - | |||||||||||||||||
Less - Accumulated depreciation | 1,677,282 | (1,677,282 | ) | - | - | |||||||||||||||||
- | 937,845 | (4,290 | ) | 933,555 | Property, plant and equipment | |||||||||||||||||
Other assets: | ||||||||||||||||||||||
Operating lease right-of-use assets | 351,828 | (351,828 | ) | - | - | g | ||||||||||||||||
Finance lease right-of-use assets | 31,778 | (31,778 | ) | - | - | g | ||||||||||||||||
- | 369,443 | (4,598 | ) | 364,845 | g | Right-of-use assets | ||||||||||||||||
Intangibles, net | 902,575 | (902,575 | ) | - | - | e | ||||||||||||||||
Goodwill | 783,453 | - | (92,732 | ) | 690,721 | C | Goodwill | |||||||||||||||
- | 947,891 | 2,209 | 950,100 | e | Content assets | |||||||||||||||||
- | 372,330 | 3,406 | 375,736 | e | Other intangible assets | |||||||||||||||||
Deferred insurance acquisition | 617,899 | - | (396,690 | ) | 221,209 | E | Deferred insurance acquisition costs | |||||||||||||||
Deferred income taxes | 202,880 | (496 | ) | (7,086 | ) | 195,298 | Deferred tax assets | |||||||||||||||
- | 458,685 | 30,013 | 488,698 | f,h,D | Other financial assets | |||||||||||||||||
Other | 340,724 | (147,807 | ) | (11,252 | ) | 181,665 | h,B | Other non-current assets | ||||||||||||||
17,715,760 | 1,734,565 | 1,616,194 | 21,066,519 | Total non-current assets | ||||||||||||||||||
Total assets | 23,626,356 | (2,990 | ) | 1,610,115 | 25,233,481 | Total assets |
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Accounts under U.S. GAAP |
| Yen in millions | Accounts under IFRS | |||||||||||||||||||
U.S. GAAP | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||||
LIABILITIES | LIABILITIES | |||||||||||||||||||||
Current liabilities: | Current liabilities: | |||||||||||||||||||||
Short-term borrowings | 977,414 | 13,908 | - | 991,322 | Short-term borrowings | |||||||||||||||||
Current portion of long-term debt | 28,516 | 72,450 | - | 100,966 | i | Current portion of long-term debt | ||||||||||||||||
Current portion of long-term operating lease liabilities | 72,275 | (72,275 | ) | - | - | i | ||||||||||||||||
Notes and accounts payable, trade | 391,223 | (391,223 | ) | - | - | j | ||||||||||||||||
- | 1,278,571 | (308 | ) | 1,278,263 | j,k,m | Trade and other payables | ||||||||||||||||
Accounts payable, other and accrued expenses | 1,461,252 | (1,461,252 | ) | - | - | k | ||||||||||||||||
Deposits from customers in the banking business | 2,558,346 | (87,579 | ) | - | 2,470,767 | l | Deposits from customers in the banking business | |||||||||||||||
Accrued income and other taxes | 148,208 | (73,992 | ) | (6,244 | ) | 67,972 | Income taxes payables | |||||||||||||||
- | 158,429 | (1,935 | ) | 156,494 | k | Participation and residual liabilities in the Pictures segment | ||||||||||||||||
- | 50,281 | - | 50,281 | k,m,o | Other financial liabilities | |||||||||||||||||
Other | 692,863 | 460,792 | (5,886 | ) | 1,147,769 | k,m | Other current liabilities | |||||||||||||||
|
|
| ||||||||||||||||||||
Total current liabilities | 6,330,097 | (51,890 | ) | (14,373 | ) | 6,263,834 | Total current liabilities | |||||||||||||||
|
|
| ||||||||||||||||||||
Non-current liabilities: | ||||||||||||||||||||||
Long-term debt | 654,145 | 295,868 | (1,641 | ) | 948,372 | i | Long-term debt | |||||||||||||||
Long-term operating lease liabilities | 304,647 | (304,647 | ) | - | - | i | ||||||||||||||||
Accrued pension and severance costs | 320,439 | 3,837 | 3,009 | 327,285 | B | Defined benefit liabilities | ||||||||||||||||
Deferred income taxes | 556,206 | (496 | ) | 482,120 | 1,037,830 | F | Deferred tax liabilities | |||||||||||||||
Future insurance policy benefits | 6,331,757 | - | 3,727 | 6,335,484 | E | Future insurance policy benefits and other | ||||||||||||||||
Policyholders’ account in the life insurance business | 3,843,393 | - | (2,318 | ) | 3,841,075 | E | Policyholders’ account in the life insurance business | |||||||||||||||
- | 124,463 | (2,998 | ) | 121,465 | n | Participation and residual liabilities in the Pictures segment | ||||||||||||||||
- | 134,532 | - | 134,532 | l,n,o | Other financial liabilities | |||||||||||||||||
|
|
| ||||||||||||||||||||
Other | 283,852 | (194,741 | ) | 1,138 | 90,249 | n | Other non-current liabilities | |||||||||||||||
|
|
| ||||||||||||||||||||
12,294,439 | 58,816 | 483,037 | 12,836,292 | Total non-current liabilities | ||||||||||||||||||
|
|
| ||||||||||||||||||||
Total liabilities | 18,624,536 | 6,926 | 468,664 | 19,100,126 | Total liabilities | |||||||||||||||||
|
|
| ||||||||||||||||||||
Redeemable noncontrolling interest | 9,916 | (9,916 | ) | - | - | o | ||||||||||||||||
|
|
| ||||||||||||||||||||
EQUITY | EQUITY | |||||||||||||||||||||
Sony Group Corporation’s stockholders’ equity: | Sony Group Corporation’s stockholders’ equity: | |||||||||||||||||||||
Common stock | 880,214 | - | - | 880,214 | Common stock | |||||||||||||||||
Additional paid-in capital | 1,290,992 | - | 8,300 | 1,299,292 | Additional paid-in capital | |||||||||||||||||
Retained earnings | 2,997,579 | - | (885,415 | ) | 2,112,164 | G | Retained earnings | |||||||||||||||
Accumulated other comprehensive income | (612,648 | ) | - | 1,588,506 | 975,858 | A,B,C D,E,F | Accumulated other comprehensive income | |||||||||||||||
Treasury stock, at cost | (225,287 | ) | - | - | (225,287 | ) | Treasury stock, at cost | |||||||||||||||
|
|
| ||||||||||||||||||||
4,330,850 | - | 711,391 | 5,042,241 | Equity attributable to Sony Group Corporation’s stockholders | ||||||||||||||||||
|
|
| ||||||||||||||||||||
Noncontrolling interests | 661,054 | - | 430,060 | 1,091,114 | F | Noncontrolling interests | ||||||||||||||||
|
|
| ||||||||||||||||||||
Total equity | 4,991,904 | - | 1,141,451 | 6,133,355 | Total equity | |||||||||||||||||
|
|
| ||||||||||||||||||||
Total liabilities and equity | 23,626,356 | (2,990 | ) | 1,610,115 | 25,233,481 | Total liabilities and equity | ||||||||||||||||
|
|
|
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Table of Contents
Reconciliation of equity as of March 31, 2021
Accounts under U.S. GAAP |
| Yen in millions | Accounts under IFRS | |||||||||||||||||||
U.S. GAAP | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||||
ASSETS | ASSETS | |||||||||||||||||||||
Current assets: | Current assets: | |||||||||||||||||||||
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 | ||||||||||||||
|
|
| ||||||||||||||||||||
Total current assets | 7,218,744 | (2,500,819 | ) | (2,908 | ) | 4,715,017 | Total current assets | |||||||||||||||
|
|
| ||||||||||||||||||||
Non-current assets: | ||||||||||||||||||||||
|
|
| ||||||||||||||||||||
Film costs | 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 | |||||||||||||||||
|
|
| ||||||||||||||||||||
Other assets: | ||||||||||||||||||||||
Operating lease right-of-use assets | 337,322 | (337,322 | ) | - | - | g | ||||||||||||||||
Finance lease right-of-use assets | 39,772 | (39,772 | ) | - | - | g | ||||||||||||||||
- | 365,641 | (7,607 | ) | 358,034 | g | Right-of-use 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 | 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 | ||||||||||||||||||
|
|
| ||||||||||||||||||||
Total assets | 26,354,840 | (380,345 | ) | 1,533,348 | 27,507,843 | Total assets | ||||||||||||||||
|
|
|
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Accounts under U.S. GAAP |
| Yen in millions | Accounts under IFRS | |||||||||||||||||||
U.S. GAAP | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||||
LIABILITIES | LIABILITIES | |||||||||||||||||||||
Current liabilities: | Current liabilities: | |||||||||||||||||||||
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 | |||||||||||||||
|
|
| ||||||||||||||||||||
Non-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 | 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 | Total non-current liabilities | ||||||||||||||||||
|
|
| ||||||||||||||||||||
Total liabilities | 20,725,185 | (371,767 | ) | 430,086 | 20,783,504 | Total liabilities | ||||||||||||||||
|
|
| ||||||||||||||||||||
Redeemable noncontrolling interest | 8,179 | (8,179 | ) | - | - | o | ||||||||||||||||
|
|
| ||||||||||||||||||||
EQUITY | EQUITY | |||||||||||||||||||||
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 | A,B,C D,E,F | 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 | |||||||||||||||
|
|
| ||||||||||||||||||||
Total equity | 5,621,476 | (399 | ) | 1,103,262 | 6,724,339 | Total equity | ||||||||||||||||
|
|
| ||||||||||||||||||||
Total liabilities and equity | 26,354,840 | (380,345 | ) | 1,533,348 | 27,507,843 | Total liabilities and equity | ||||||||||||||||
|
|
|
- 70 -
Table of Contents
Reconciliation of profit or loss for three months ended June 30, 2020
| ||||||||||||||||||||||
Accounts under U.S. GAAP |
| Yen in millions | Accounts under IFRS | |||||||||||||||||||
U.S. GAAP | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||||
Sales and operating revenue: | Sales and financial services revenue: | |||||||||||||||||||||
Net sales | 1,504,870 | 19,132 | 958 | 1,524,960 | q | Sales | ||||||||||||||||
Financial services revenue | 444,916 | 3,448 | (10,375 | ) | 437,989 | r,D | Financial services revenue | |||||||||||||||
Other operating revenue | 19,133 | (19,133 | ) | - | - | q | ||||||||||||||||
|
|
| ||||||||||||||||||||
1,968,919 | 3,447 | (9,417 | ) | 1,962,949 | Total sales and financial services revenue | |||||||||||||||||
|
|
| ||||||||||||||||||||
Costs and expenses: | Costs and expenses: | |||||||||||||||||||||
Cost of sales | 1,052,673 | (8 | ) | (3,242 | ) | 1,049,423 | Cost of sales | |||||||||||||||
Selling, general and administrative | 301,166 | 158 | (1,039 | ) | 300,285 | B | Selling, general and administrative | |||||||||||||||
Financial services expenses | 397,659 | 3,461 | 784 | 401,904 | r | Financial services expenses | ||||||||||||||||
Other operating income, net | (11,248 | ) | - | 558 | (10,690 | ) | Other operating (income) expense, net | |||||||||||||||
|
|
| ||||||||||||||||||||
1,740,250 | 3,611 | (2,939 | ) | 1,740,922 | Total costs and expenses | |||||||||||||||||
|
|
| ||||||||||||||||||||
Equity in net loss of affiliated companies | (274 | ) | - | (28 | ) | (302 | ) | D | Share of profit (loss) of investments accounted for using the equity method | |||||||||||||
|
|
| ||||||||||||||||||||
Operating income | 228,395 | (164 | ) | (6,506 | ) | 221,725 | Operating income | |||||||||||||||
|
|
| ||||||||||||||||||||
Other income: | ||||||||||||||||||||||
Interest and dividends | 2,836 | (2,836 | ) | - | - | |||||||||||||||||
Gain on equity securities, net | 96,900 | (96,900 | ) | - | - | |||||||||||||||||
Other | 1,273 | (1,273 | ) | - | - | |||||||||||||||||
- | 100,688 | (44,012 | ) | 56,676 | s,D | Financial income | ||||||||||||||||
|
|
| ||||||||||||||||||||
Other expenses: | ||||||||||||||||||||||
Interest expenses | 1,805 | (1,805 | ) | - | - | |||||||||||||||||
Foreign exchange loss, net | 5,054 | (5,054 | ) | - | - | |||||||||||||||||
Other | 2,626 | (2,626 | ) | - | - | |||||||||||||||||
- | 9,000 | 839 | 9,839 | s,B | Financial expenses | |||||||||||||||||
|
|
| ||||||||||||||||||||
Income before income taxes | 319,919 | - | (51,357 | ) | 268,562 | H | Income before income taxes | |||||||||||||||
|
|
| ||||||||||||||||||||
Income taxes | 72,878 | - | (8,534 | ) | 64,344 | I | Income taxes | |||||||||||||||
|
|
| ||||||||||||||||||||
Net income | 247,041 | - | (42,823 | ) | 204,218 | Net income | ||||||||||||||||
|
|
| ||||||||||||||||||||
Net income attributable to | ||||||||||||||||||||||
Net income attributable to Sony Group Corporation’s stockholders | 233,251 | - | (39,668 | ) | 193,583 | Sony Group Corporation’s stockholders | ||||||||||||||||
Net income attributable to noncontrolling interests | 13,790 | - | (3,155 | ) | 10,635 | Noncontrolling interests | ||||||||||||||||
|
|
|
- 71 -
Table of Contents
Reconciliation of comprehensive income for three months ended June 30, 2020
Yen in millions | Accounts under IFRS | |||||||||||||||||||||
Accounts under U.S. GAAP |
| U.S. GAAP | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||
Net income | 247,041 | - | (42,823 | ) | 204,218 | Net income | ||||||||||||||||
Other comprehensive income, net of tax - | Other comprehensive income, net of tax - | |||||||||||||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||||||||||||
- | - | 40,098 | 40,098 | D | Changes in equity instruments measured at fair value through other comprehensive income | |||||||||||||||||
Pension liability adjustment | 566 | - | (605 | ) | (39 | ) | Remeasurement of defined benefit pension plans | |||||||||||||||
- | - | 36 | 36 | Share of other comprehensive income of investments accounted for using the equity method | ||||||||||||||||||
Items that may be reclassified subsequently to profit or loss | ||||||||||||||||||||||
Unrealized losses on securities | (32,111 | ) | - | (35,747 | ) | (67,858 | ) | D,E,F | Changes in debt instruments measured at fair value through other comprehensive income | |||||||||||||
Unrealized losses on derivative instruments | (260 | ) | - | - | (260 | ) | Cash flow hedges | |||||||||||||||
Debt valuation adjustments | (1,650 | ) | - | - | (1,650 | ) | Insurance contract valuation adjustments | |||||||||||||||
Foreign currency translation adjustments | (11,483 | ) | 67 | 12,209 | 793 | Exchange differences on translating foreign operations | ||||||||||||||||
- | (67 | ) | - | (67 | ) | Share of other comprehensive income of investments accounted for using the equity method | ||||||||||||||||
(44,938 | ) | - | 15,991 | (28,947 | ) | Total other comprehensive income, net of tax | ||||||||||||||||
Total comprehensive income | 202,103 | - | (26,832 | ) | 175,271 | Comprehensive income | ||||||||||||||||
Comprehensive income attributable to | ||||||||||||||||||||||
Comprehensive income attributable to Sony Group Corporation’s stockholders | 201,583 | - | (11,440 | ) | 190,143 | Sony Group Corporation’s stockholders | ||||||||||||||||
Comprehensive income attributable to noncontrolling interests | 520 | - | (15,392 | ) | (14,872 | ) | Noncontrolling interests |
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Reconciliation of profit or loss for the fiscal year ended March 31, 2021
Accounts under U.S. GAAP |
| Yen in millions | Accounts under IFRS | |||||||||||||||||||
U.S. GAAP | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||||
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 | |||||||||||||||||
Costs and expenses: | Costs and expenses: | |||||||||||||||||||||
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 | |||||||||||||||
Operating income | 971,865 | (263) | (16,347 | ) | 955,255 | Operating income | ||||||||||||||||
Other income: | ||||||||||||||||||||||
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 | Financial income | ||||||||||||||||
Other expenses: | ||||||||||||||||||||||
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 | Financial expenses | ||||||||||||||||
Income before income taxes | 1,192,370 | - | (194,405 | ) | 997,965 | H | Income before income taxes | |||||||||||||||
Income taxes | 995 | - | (46,926 | ) | (45,931 | ) | I | Income taxes | ||||||||||||||
Net income | 1,191,375 | - | (147,479 | ) | 1,043,896 | Net income | ||||||||||||||||
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 |
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Reconciliation of comprehensive income for the fiscal year ended March 31, 2021
Yen in millions | Accounts under IFRS | |||||||||||||||||||||
Accounts under U.S. GAAP |
| U.S. GAAP | Reclassification | Recognition and measurement differences | IFRS | Note | ||||||||||||||||
Net income | 1,191,375 | - | (147,479 | ) | 1,043,896 | Net income | ||||||||||||||||
Other comprehensive income, net of tax - | Other comprehensive income, net of tax - | |||||||||||||||||||||
Items that will not be reclassified to profit or loss | ||||||||||||||||||||||
- | - | 144,740 | 144,740 | D | Changes in equity instruments measured at fair value through other comprehensive income | |||||||||||||||||
Pension liability adjustment | 12,965 | - | (1,410 | ) | 11,555 | Remeasurement of defined benefit pension plans | ||||||||||||||||
- | - | 87 | 87 | Share of other comprehensive income of investments accounted for using the equity method | ||||||||||||||||||
Items that may be reclassified subsequently to profit or loss | ||||||||||||||||||||||
Unrealized losses on securities | (102,492 | ) | - | (103,057 | ) | (205,549 | ) | D,E,F | Changes in debt instruments measured at fair value through other comprehensive income | |||||||||||||
Unrealized losses on derivative instruments | 1,513 | - | (1,462 | ) | 51 | Cash flow hedges | ||||||||||||||||
Debt valuation adjustments | (3,120 | ) | - | - | (3,120 | ) | Insurance contract valuation adjustments | |||||||||||||||
Foreign currency translation adjustments | 106,826 | (798 | ) | 9,293 | 115,321 | Exchange differences on translating foreign operations | ||||||||||||||||
- | 798 | - | 798 | Share of other comprehensive income of investments accounted for using the equity method | ||||||||||||||||||
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 | ||||||||||||||||
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 |
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(4) Notes to reconciliation
Reclassifications
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 in “Marketable securities” under U.S. GAAP, have been reclassified into “Investments and advances in the Financial Services segment” as current assets or non-current assets under IFRS, after considering the current/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”). |
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. |
c. | “Other receivables”, which were separately presented under U.S. GAAP, have been reclassified into “Trade and other receivables, and contract assets” under IFRS. |
d. | “Other financial assets”, which were included in “Prepaid expenses and other current assets” under U.S. GAAP, are separately presented under IFRS. |
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. |
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” as non-current assets for the amounts related to the Financial Services segment and “Other financial assets” as non-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 or non-current assets under IFRS after considering the current/non-current distinction based on the terms of the contract in accordance with paragraph 66 of IAS 1. |
g. | “Operating lease right-of-use assets” and “Finance lease right-of-use assets”, which were separately presented under U.S. GAAP, have been reclassified into “Right-of-use assets” under IFRS. |
h. | “Other financial assets”, which were included in “Other” in other assets under U.S. GAAP, are separately presented under IFRS. |
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. |
j. | “Notes and accounts payable, trade”, which were separately presented under U.S. GAAP, have been reclassified into “Trade and other payables” under IFRS. |
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. |
l. | “Deposits from customers in the banking business”, which were separately presented under U.S. GAAP, have been reclassified into “Other financial liabilities” of non-current liabilities under IFRS, after considering the current/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. |
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. |
o. | “Redeemable noncontrolling interest”, which was separately presented under U.S. GAAP, has been reclassified into “Other financial liabilities” under IFRS. |
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. |
q. | “Other operating revenue”, which was separately presented under U.S. GAAP, has been reclassified into “Sales” under IFRS. |
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. |
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:
Yen in millions | ||||||||||||
April 1, 2020 | June 30, 2020 | March 31, 2021 | ||||||||||
(Consolidated Statements of Financial Position) | ||||||||||||
Accumulated other comprehensive income | (509,872 | ) | (509,539 | ) | (510,091 | ) | ||||||
|
|
|
|
|
|
|
|
| ||||
Adjustment to retained earnings | (509,872 | ) | (509,539 | ) | (510,091 | ) | ||||||
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|
|
|
|
|
|
|
|
B. Post-employment benefits
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.
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:
Yen in millions | ||||||||||||
April 1, 2020 | June 30, 2020 | March 31, 2021 | ||||||||||
(Consolidated Statements of Financial Position) | ||||||||||||
Other non-current assets | (16,829 | ) | (11,826 | ) | (17,083 | ) | ||||||
Defined benefit liabilities | 30 | (2,355 | ) | (62 | ) | |||||||
Accumulated other comprehensive income | (300,385 | ) | (301,131 | ) | (277,379 | ) | ||||||
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|
|
|
|
|
|
| ||||
Adjustment to retained earnings | (317,184 | ) | (315,312 | ) | (294,524 | ) | ||||||
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Yen in millions | ||||||||
Three months ended June 30, 2020 | Fiscal year ended March 31, 2021 | |||||||
(Consolidated Statements of Income) | ||||||||
Cost of sales | - | (2,193 | ) | |||||
Selling, general and administrative | (397 | ) | (244 | ) | ||||
Financial expenses | 2,288 | 9,476 | ||||||
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|
|
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| |||
Increase (decrease) in adjustment to pre-tax income | 1,891 | 7,039 | ||||||
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C. Impairment of goodwill
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 the 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 the 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 the 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 the IoT-related business was determined by the value in use and a pre-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 the 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 a pre-tax discount rate of 15.9% was used in the measurement.
The impact of this change is as follows:
Yen in millions | ||||||||||||
April 1, 2020 | June 30, 2020 | March 31, 2021 | ||||||||||
(Consolidated Statements of Financial Position) | ||||||||||||
Goodwill | (96,817 | ) | (96,368 | ) | (100,727 | ) | ||||||
Accumulated other comprehensive income | - | (449 | ) | 2,942 | ||||||||
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Adjustment to retained earnings | (96,817 | ) | (96,817 | ) | (97,785 | ) | ||||||
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Yen in millions | ||||||||
Three months ended June 30, 2020 | Fiscal year ended March 31, 2021 | |||||||
(Consolidated Statements of Income) | ||||||||
Other operating (income) expense, net | - | (968 | ) | |||||
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| |||
Increase (decrease) in adjustment to pre-tax income | - | (968 | ) | |||||
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The carrying amount of goodwill by segment is as follows:
Yen in millions | ||||||||
April 1, 2020 | March 31, 2021 | |||||||
Game & Network Services *1 | 170,974 | 172,360 | ||||||
Music *2 | 391,325 | 408,424 | ||||||
Pictures *3 | 103,626 | 120,083 | ||||||
Electronics Products & Solutions | 11,354 | 11,533 | ||||||
Imaging & Sensing Solutions | 2,816 | 2,875 | ||||||
Financial Services | 10,834 | 10,834 | ||||||
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Total | 690,929 | 726,109 | ||||||
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*1 | Game & Network Services (“G&NS”) |
All of the goodwill shown in the G&NS line of the table above relates to the PlayStation® business. Goodwill related to the CGU has a carrying amount of 170,974 million yen and 172,360 million yen, as of April 1, 2020 and March 31, 2021, respectively. Intangible assets with indefinite useful lives related to the PlayStation® business have a carrying amount of 57,397 million yen and 57,449 million yen, as of April 1, 2020 and March 31, 2021, 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 future as well. 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 a three-year forecasted period derived from the MRP. A perpetual growth rate is utilized to determine a terminal cash flow value and is set after the final year of the forecasted period. The growth rate and the pre-tax discount rate are 1.5% and 9.8% as of April 1, 2020 and 1.5% and 8.7% as of March 31, 2021, respectively.
*2 | Music |
Goodwill shown in the Music line of the table above is primarily allocated to the worldwide recorded music and music publishing CGUs excluding operations in Japan.
Goodwill related to the worldwide recorded music CGU has a carrying amount of 128,918 million yen and 136,572 million yen, as of April 1, 2020 and March 31, 2021, 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 a three-year forecasted period derived from the MRP. A perpetual growth rate is utilized to determine a terminal cash flow value and is set after the final year of the forecasted period. The growth rate and the pre-tax discount rate are 1.0% and 9.2% as of April 1, 2020 and 1.0% and 9.3% as of March 31, 2021, respectively.
Goodwill related to the music publishing CGU has a carrying amount of 238,684 million yen and 248,130 million yen, as of April 1, 2020 and March 31, 2021, 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 a three-year forecasted period derived from the MRP. A perpetual growth rate is utilized to determine a terminal cash flow value and is set after the final year of the forecasted period. The growth rate and the pre-tax discount rate are 2.5% and 8.4% as of April 1, 2020 and 2.5% and 8.2% as of March 31, 2021, respectively.
*3 | Pictures |
Goodwill shown in the Pictures line of the table above is primarily allocated to the United States television network CGU. Goodwill related to the CGU is recognized with the carrying amounts of 54,156 million yen and 55,092 million yen, as of April 1, 2020 and March 31, 2021, 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 a three-year forecasted period derived from the MRP. The terminal value is based on an earnings multiple applied to the final year of the forecasted earnings. The growth rate beyond the MRP period and the pre-tax discount rate are 1.0% and 15.9% as of April 1, 2020 and 1.0% and 14.7% as of March 31, 2021, respectively.
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The value in use calculation uses key assumptions such as the pre-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 and pre-tax discount rate that are used in the evaluation of the recoverable amounts change within a reasonably predictable range.
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 are held-to-maturity, primarily 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:
Yen in millions | ||||||||||||
April 1, 2020 | June 30, 2020 | March 31, 2021 | ||||||||||
(Consolidated Statements of Financial Position) | ||||||||||||
Other financial assets (non-current) | 22,110 | 30,233 | 31,627 | |||||||||
Investments and advances in the Financial Services segment (non-current) | 2,439,946 | 2,093,082 | 1,649,660 | |||||||||
Accumulated other comprehensive income | (2,424,510 | ) | (2,142,662 | ) | (1,840,980 | ) | ||||||
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Adjustment to retained earnings | 37,546 | (19,347 | ) | (159,693 | ) | |||||||
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Yen in millions | ||||||||||||
Three months ended June 30, 2020 | Fiscal year ended March 31, 2021 | |||||||||||
(Consolidated Statements of Income) | ||||||||||||
Financial services revenue | (13,558 | ) | (12,547 | ) | ||||||||
Financial services expenses | - | (854 | ) | |||||||||
Share of profit (loss) of investments accounted for using the equity method | 3 | (30 | ) | |||||||||
Financial income | (43,578 | ) | (178,677 | ) | ||||||||
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Increase (decrease) in adjustment to pre-tax income | (57,133 | ) | (192,108 | ) | ||||||||
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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 and as of June 30, 2020.
The impact of this change before considering the tax effect is as follows:
Yen in millions | ||||||||||||
April 1, 2020 | June 30, 2020 | March 31, 2021 | ||||||||||
(Consolidated Statements of Financial Position) | ||||||||||||
Deferred insurance acquisition costs | (412,997 | ) | (396,690 | ) | (33,434 | ) | ||||||
Future insurance policy benefits and other | (273,530 | ) | (3,728 | ) | (14,609 | ) | ||||||
Policyholders’ account in the life insurance business | 2,261 | 2,318 | 2,170 | |||||||||
Accumulated other comprehensive income | 684,266 | 398,100 | 45,873 | |||||||||
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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:
Yen in millions | ||||||||||||
April 1, 2020 | June 30, 2020 | March 31, 2021 | ||||||||||
(Consolidated Statements of Financial Position) | ||||||||||||
Deferred tax liabilities | (489,839 | ) | (475,603 | ) | (452,189 | ) | ||||||
Noncontrolling interests | (440,099 | ) | (427,309 | ) | - | |||||||
Accumulated other comprehensive income | 929,938 | 902,912 | 452,189 | |||||||||
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G. Retained earnings
Main items of the differences on retained earnings are as follows:
Yen in millions | ||||||||||||
April 1, 2020 | June 30, 2020 | March 31, 2021 | ||||||||||
Retained earnings under U.S. GAAP | 2,765,187 | 2,997,579 | 3,857,152 | |||||||||
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1 Exchange differences on translating foreign operations *A | (509,872 | ) | (509,539 | ) | (510,091 | ) | ||||||
2 Post-employment benefits *B | (317,184 | ) | (315,312 | ) | (294,524 | ) | ||||||
3 Impairment of goodwill *C | (96,817 | ) | (96,817 | ) | (97,785 | ) | ||||||
4 Equity instruments and debt instruments *D | 37,546 | (19,347 | ) | (159,693 | ) | |||||||
5 Other | 6,616 | (18,446 | ) | 13,249 | ||||||||
Tax effect of adjustments | 64,221 | 74,046 | 106,195 | |||||||||
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Total | (815,490 | ) | (885,415 | ) | (942,649 | ) | ||||||
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Retained earnings under IFRS | 1,949,697 | 2,112,164 | 2,914,503 | |||||||||
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H. Income before income taxes
Main items of the differences on income before income taxes are as follows:
Yen in millions | ||||||||
Three months ended June 30, 2020 | Fiscal year ended March 31, 2021 | |||||||
Income before income taxes under U.S. GAAP | 319,919 | 1,192,370 | ||||||
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1 Post-employment benefits *B | 1,891 | 7,039 | ||||||
2 Impairment of goodwill *C | - | (968 | ) | |||||
3 Equity instruments and debt instruments *D | (57,133 | ) | (192,108 | ) | ||||
4 Other | 3,885 | (8,368 | ) | |||||
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Total | (51,357 | ) | (194,405 | ) | ||||
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Income before income taxes under IFRS | 268,562 | 997,965 | ||||||
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I. Income taxes
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
Main items of the differences on consolidated statements of cash flows are as follows:
Yen in millions | ||||||||||||
Three months ended June 30, 2020 | ||||||||||||
Cash flows from operating activities | Cash flows from investing activities | Cash flows from financing activities | ||||||||||
Consolidated statements of cash flows under U.S. GAAP | 126,185 | (475,273 | ) | 290,252 | ||||||||
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1. Principal payments for operating lease liabilities*1 | 17,326 | - | (17,326 | ) | ||||||||
2. Additions and disposals of content assets*2 | (4,816 | ) | 4,816 | - | ||||||||
3. Changes in assets and liabilities in the Financial Services segment*3 | ||||||||||||
(1) Investments and advances in the Financial Services segment | (317,027 | ) | 317,027 | - | ||||||||
(2) Deposits from customers in the banking business | 116,676 | - | (116,676 | ) | ||||||||
(3) Borrowings in the life insurance business and the banking business | 194,222 | - | (194,222 | ) | ||||||||
(4) Future insurance policy benefits and other and policyholders’ account in the life insurance business | 29,789 | - | (29,789 | ) | ||||||||
4. Other | 410 | 1,065 | 243 | |||||||||
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Total | 36,580 | 322,908 | (357,770 | ) | ||||||||
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Consolidated statements of cash flows under IFRS | 162,765 | (152,365 | ) | (67,518 | ) | |||||||
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Yen in millions | ||||||||||||
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 | ||||||||
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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 | ) | ||||||||
4. Other | 3,395 | 1,111 | (2,333 | ) | ||||||||
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Total | (209,933 | ) | 1,217,606 | (1,005,500 | ) | |||||||
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Consolidated statements of cash flows under IFRS | 1,140,217 | (563,910 | ) | (338,533 | ) | |||||||
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*1 | The principal 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 | The 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 |
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.
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12. | Subsequent events |
Ellation Holdings, Inc. Acquisition
On August 9, 2021, Sony Pictures Entertainment Inc. (“SPE”), a wholly-owned subsidiary of Sony, through Funimation Global Group, LLC (“Funimation”), completed the acquisition of 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 wholly-owned subsidiary of Sony Music Entertainment (Japan) Inc. The consideration for this acquisition is approximately 130,000 million yen (1,175 million U.S. dollars), subject to customary working capital and other adjustments. As a result of this acquisition, Ellation has become a wholly-owned subsidiary of Sony. The purchase price allocation for this transaction is still in process and has not yet been finalized.
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i) Dividends declared
A year-end cash dividend for Sony Group Corporation’s common stock was approved at the Board of Directors meeting held on April 28, 2021 as below:
1. Total amount of year-end cash dividends:
37,177 million yen
2. Amount of year-end cash dividends per share:
30.00 yen
3. Payment date:
May 27, 2021
Note: Year-end cash dividends were distributed to the shareholders recorded or registered as the holders or pledgees of shares in Sony Group Corporation’s register of shareholders as of the end of March 31, 2021.
ii) Litigation
For the legal proceedings, please refer to “IV Financial Statements – Notes to Condensed Consolidated Financial Statements – 9. Purchase commitments, contingent liabilities and other”.
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