Consolidated Financial Statements 2023

As of and for the Year Ended February 28, 2023, and Independent Auditor's Report

I n d e p e n d e n t A u d i t o r 's R e p o r t

Opinion

We have audited the consolidated financial statements of Furuno Electric Co., Ltd. and its consolidated subsidiaries (the "Group"), which comprise the consolidated balance sheet as of February 28, 2023, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, all expressed in Japanese yen.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of February 28, 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.

Convenience Translation

Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in accordance with the basis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled our other ethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matter

A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements of the current period. The matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on the matter.

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Recoverability of Furuno Electric Co., Ltd.'s deferred tax assets

Key Audit Matter Description

How the Key Audit Matter Was Addressed

in the Audit

The Group recorded deferred tax assets of 412 million

In testing the recoverability of deferred tax assets, we

yen in the consolidated balance sheet as of February

performed the following audit procedures, among

28, 2023. As described in Note 12 "Income Taxes," the

others:

amount of deferred tax assets before offsetting against

1 Internal Control Testing

deferred tax liabilities was 1,194 million yen, which is

• We tested the design and operating effectiveness

the amount calculated by deducting the valuation

of the controls over the determination of the

allowance of 5,347 million yen from the deferred tax

recoverability of deferred tax assets, including

assets of 6,542 million yen related to deductible

estimation of future taxable income.

temporary differences and tax loss carryforwards.

2 Assessment of the Reasonableness of Estimation

Among these amounts, Furuno Electric Co., Ltd., (the

of Taxable Income

"Company") recognized the total amount of deferred

tax assets related to deductible temporary differences

• With the assistance of our tax specialist, we

and tax loss carryforwards of 3,956 million yen and the

examined whether the amounts of deductible

valuation allowance of 3,579 million yen, respectively.

temporary differences and tax loss carryforwards

The deferred tax assets are recorded to the extent that

were accurately calculated.

they have the effect of reducing future tax expenses by

• We tested the scheduling of the year in which

using deductible temporary differences or offsetting

deductible temporary differences are expected to

tax loss carryforwards against taxable income.

be used and the operating loss carryforwards are

As described in Note 3 "Significant Accounting

expected to be deducted for tax purposes by

reviewing related documents.

Estimates - Recoverability of deferred tax assets," the

recoverability of deferred tax assets is determined

• We evaluated the consistency of future business

based on estimation of future taxable income and tax

plans used in estimating the future taxable income

planning. Future taxable income is estimated based on

with the business plans for the following year

the Company's business plans. Forecasts of sales and

approved by the Board of Directors.

cost of sales used in the business plans include

• Regarding the significant assumptions, such as

significant assumptions, such as amount of orders

amount of orders received and amounts of

received and amounts of production output that

production output that are included in future

involves uncertainties, and management's judgments

business plans, we made inquiries of the

have a significant impact on the amount of deferred tax

management and the inspection of relevant

assets.

documentation and examined whether these

Based on the above, we determined that the

assumptions are reasonably set in light of status

estimation of future taxable income with respect to

of orders received and production plans of major

the recoverability of deferred tax assets is particularly

factories.

significant for the audit of the consolidated financial

statements for the current fiscal year. Therefore, we

identified it as a key audit matter.

Other Information

Management is responsible for the other information. Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the Directors' execution of duties relating to the design and operating effectiveness of the controls over the other information. The other information comprises the information included in the Annual Report, but does not include the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

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In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Audit & Supervisory Board Members and the Audit & Supervisory Board for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the Directors' execution of duties relating to the design and operating effectiveness of the controls over the Group's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks. The procedures selected depend on the auditor's judgment. In addition, we obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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  • Evaluate whether the overall presentation and disclosures of the consolidated financial statements are in accordance with accounting principles generally accepted in Japan, as well as the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide Audit & Supervisory Board members and the Audit & Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with Audit & Supervisory Board members and the Audit & Supervisory Board, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan

Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

July 13, 2023

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Furuno Electric Co. Ltd. published this content on 09 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 August 2023 09:26:04 UTC.