Analysis of Disclosure in Basic Policy Regarding Selection of Accounting Standards. Tokyo Stock Exchange, Inc.

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Lynne Burns
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1 Analysis of Disclosure in Basic Policy Regarding Selection of Accounting Standards Tokyo Stock Exchange, Inc. 1

2 I. Background Jun. 24, 2014 Japan Revitalization Strategy (Revised in 2014) 4) Promoting of an increase in the number of companies voluntarily ing IFRS Tokyo Stock Exchange will encourage listed companies to explain to investors their basic views on the selection of accounting standards (for example, whether they are considering ing IFRS). Nov. 11, 2014 Revision of Guidelines for Financial Results Request description on Basic Policy Regarding Selection of Accounting Standards in Financial Results <Guidelines for Financial Results> Please describe basic policy regarding selection of accounting standards. For example, whether you are considering the ion of IFRS. (stage of consideration, scheduled ion date) Adoption from Financial Results for FY-ended Mar. 31, 2015 (early ion possible) Jun. 30, 2015 Japan Revitalization Strategy (Revised in 2015) 4) Further promotion of an increase in the number of companies voluntarily ing IFRS Listed companies disclose their progress in considering the ion of IFRS in Basic Policy Regarding Selection of Accounting Standards of the financial results. The government will analyze this together with Tokyo Stock Exchange and disseminate the state of IFRS ion to contribute to efforts among listed companies to consider transitioning to IFRS. 2

II. Scope of Analysis Coverage:3,194 companies TSE-listed companies that provided description in Basic Policy Regarding Selection of Accounting Standards (hereinafter Basic Policy ) of financial

3 II. Scope of Analysis Coverage:3,194 companies TSE-listed companies that provided description in Basic Policy Regarding Selection of Accounting Standards (hereinafter Basic Policy ) of financial results:3,193 companies FY ended March 2015:2,308 companies FY ended April 2015 ~ FY ended December 2015:885 companies Other companies that have ed IFRS (FY ended January 2016 ~ FY ended February 2016):1 company 3

4 Ⅲ. Content of Analysis of IFRS Adoption 1. Categories of Companies in Analysis(P.5) 2. Shift in Number of Companies That Have Adopted IFRS (P.6) 3. Number and Market Cap of Companies That Have Adopted IFRS(P.7~8) 4. IFRS Adoption by Industrial Sector(P.9~13) 5. IFRS Adoption Date(P.14) 6. Stage of Progress Among "4 Companies Considering IFRS Adoption"(P.15) 4

5 Ⅲ-1. Categories of Companies in Analysis Categories of companies included in analysis (3,194 companies) 1 Companies that have ed IFRS(74 companies) Companies that submitted IFRS-based consolidated financial statements or quarterly consolidated financial statements by Mar. 31, Companies that have decided to IFRS(32 companies) Companies whose executive body has disclosed, by Mar. 31, 2016, its decision to IFRS 3 Companies planning to IFRS(22 companies) Companies whose executive body has described plans to IFRS in its Basic Policy, but yet to decide on IFRS ion 4 Companies considering IFRS ion(213 companies) Companies that described that it is considering IFRS ion in its Basic Policy 5 Other companies(2,853 companies) For example, the following companies: Company that mentioned only the possibility of future ion of IFRS Companies that mentioned only its current accounting standards 5

6 Ⅲ-2. Shift in Number of Companies That Have Adopted IFRS The combined number of 1 Companies that have ed IFRS, 2 Companies that have decided to IFRS, and 3 Companies planning to IFRS is 128 companies as of Mar. 31, Number of companies companies since previous announcement Jun Dec Mar Aug Mar Companies planning to IFRS 2Companies that have decided to IFRS 1Companies that have ed IFRS 6

Ⅲ-3. Number and Market Cap of Companies That Have Adopted IFRS The combined market capitalization of 1 Companies that have ed IFRS and 2 Companies that have decided to IFRS and 3 Companies planning

7 Ⅲ-3. Number and Market Cap of Companies That Have Adopted IFRS The combined market capitalization of 1 Companies that have ed IFRS and 2 Companies that have decided to IFRS and 3 Companies planning to IFRS is JPY 140 trillion (128 companies). Number of companies Market capitalization 1 Companies that have ed IFRS 2 Companies that have decided to IFRS 3 Companies planning to IFRS 4 Companies considering IFRS ion 74 companies JPY 85 trillion 32 companies JPY 19 trillion 22 companies JPY 35 trillion 213 companies JPY 84 trillion JPY 140 trillion (128 companies) 5 Other companies 2,853 companies JPY 262 trillion Total 3,194 companies JPY 486 trillion Note: Market capitalization as of Mar. 31,

8 Ⅲ-3. Number and Market Cap of Companies That Have Adopted IFRS The combined market capitalization of 1 Companies that have ed IFRS and 2 Companies that have decided to IFRS and 3 Companies planning to IFRS is JPY 140 trillion, 27% of the entire listed market capitalization (JPY 518 trillion). All TSE-listed companies 1~3 JPY 140 trillion JPY 518 trillion (128 companies):27% (3,494 companies) +3% since previous Not included in analysis JPY 32 trillion (300 companies):6% 1 Companies that have ed IFRS JPY 85 trillion (74 companies) :16% announcement 2 Companies that have decided to IFRS JPY 19 trillion (32 companies):4% 5 Other companies JPY 262 trillion (2,853 companies):51% 4 Companies considering IFRS ion JPY 84 trillion (213 companies) :16% 3 Companies planning to IFRS JPY 35 trillion (22 companies):7% Note: Market capitalization as of Mar. 31,

9 Ⅲ-4. IFRS Adoption by Industrial Sector By industrial sector, "1 Companies that have ed IFRS, "2 Companies that have decided to IFRS, and "3 Companies planning to IFRS" are found in 23 of the 33 industrial sectors. +1 industrial sector since previous announcement Industrial sectors that have a significant number of "1 Companies that have ed IFRS" and "2 Companies that have decided to IFRS" and "3 Companies planning to IFRS" are: Electric Appliances (20), Pharmaceutical (13), Information & Communication (12), Transportation Equipment (11), Services (11), and Wholesale Trade (10). Note: (1) Market capitalization as of Mar 31, (2) Numbers to the left of company names indicate the order of their market capitalization within the industrial sector. Rubber Products (4/19) Pharmaceutical (13/65) Information & Communication (12/376) Wholesale Trade (10/319) Foods (6/125) 1Adopted 2Decided to (2) Sumitomo Rubber Industries (5) Sumitomo Riko (1) Takeda Pharmaceutical (2) Astellas Pharma (3) ONO PHARMACEUTICAL (5) Eisai (6) CHUGAI PHARMACEUTICAL (8) DAIICHI SANKYO (9) Mitsubishi Tanabe Pharma (12) SANTEN PHARMACEUTICAL (18) Sosei Group (42) GNI Group (2) KDDI (4) SoftBank (5) Yahoo Japan (8) NEXON (15) KONAMI (24) ITOCHU Techno-Solutions (115) Infoteria (204) Fusion Partners (235) Hotto Link (1) Mitsubishi (2) MITSUI (3) ITOCHU (4) SUMITOMO (5) Marubeni (9) Hitachi High-Technologies (13) Sojitz (29) ITOCHU ENEX (44) KANEMATSU (1) JAPAN TOBACCO (2) Asahi Group Holdings (3) Suntory Beverage & Food (13) NH Foods 3Planning to (1) BRIDGESTONE (3) Yokohama Rubber (4) Otsuka Holdings (10) Kyowa Hakko Kirin (19) SAWAI PHARMACEUTICAL (1) NTT DOCOMO (3) NIPPON TELEGRAPH AND TELEPHONE (6) NTT DATA (19) AUTOBACS SEVEN (4) Ajinomoto (5) Kirin Holdings Market capitalization (A) Total market cap of industrial sector(b) JPY 4.3 trillion JPY 21.6 trillion JPY 37.5 trillion JPY 11.1 trillion JPY 12.9 trillion JPY 4.9 trillion JPY 28.5 trillion JPY 52.5 trillion JPY 21.1 trillion JPY 24.9trillion (A/B) 87% 76% 71% 53% 52% 9

10 Ⅲ-4. IFRS Adoption by Industrial Sector Oil & Coal Products (1/13) Precision Instruments (4/51) Electric Appliances (20/262) Chemicals (8/209) Transportation Equipment (11/97) 1Adopted 2Decided to (1) JX Holdings (1) HOYA (21) Noritsu Koki (6) Hitachi (7) Panasonic (11) SYSMEX (14) TOSHIBA (15) FUJITSU (16) RICOH (20) SEIKO EPSON (26) KONICA MINOLTA (30) BROTHER INDUSTRIES (41) ADVANTEST (47) Hitachi Kokusai Electric (53) TOSHIBA TEC (59) CLARION (63) ANRITSU (142) SUMIDA (147) NIHON DEMPA KOGYO (160) TEAC (208) NISHISHIBA ELECTRIC (1) Kao (5) NITTO DENKO (8) Mitsubishi Chemical Holdings (17) TAIYO NIPPON SANSO (19) Hitachi Chemical (64) The Nippon Synthetic Chemical Industry (66) KUREHA (2) HONDA MOTOR (4) DENSO (22) TS TECH (26) KEIHIN (29) F.C.C. (30) NISSIN KOGYO (32) KYB (35) SHOWA (54) YUTAKA GIKEN (59) Yachiyo Industry 3Planning to (4) NIKON (15) NIKKISO (9) NIDEC (19) NEC (10) NIPPON PAINT HOLDINGS (10) Mazda Motor Market capitalization (A) JPY 1.1 trillion JPY 2.5 trillion JPY 14.5 trillion JPY 6.8 trillion JPY 11.4 trillion Total market cap of industrial sector(b) JPY 2.4 trillion JPY 8.1 trillion JPY 54.6 trillion JPY 30.3 trillion JPY 53.3 trillion (A/B) 45% 31% 27% 23% 21% 10

11 Ⅲ-4. IFRS Adoption by Industrial Sector Metal Products (2/85) Services (11/379) Glass & Ceramics Products (2/58) Other Financing Business (3/29) Retail Trade (5/338) 1Adopted 2Decided to (1) LIXIL Group (4) DENTSU (5) Rakuten (7) M3 (16) DeNA (23) COOKPAD (26) NEXT (35) TechnoPro Holdings (41) BELLSYSTEM24 HOLDINGS (46) SEPTENI HOLDINGS (51) OUTSOURCING (1) Asahi Glass (10) Nippon Sheet Glass (2) Japan Exchange Group (8) Hitachi Capital (14) J Trust (2) FAST RETAILING (26) SKYLARK (51) COLOWIDE (64) Toridoll 3Planning to Market capitalization (A) Total market cap of industrial sector(b) (12) G-TEKT (117) Metaps (79) OHSHO FOOD SERVICE JPY 0.8 trillion JPY 5.1 trillion JPY 0.8 trillion JPY 1.4 trillion JPY 4.4 trillion JPY 3.7 trillion JPY 25.3 trillion JPY 4.2 trillion JPY 7.8 trillion JPY 33.0 trillion (A/B) 21% 20% 19% 17% 13% 11

12 Ⅲ-4. IFRS Adoption by Industrial Sector Iron and Steel (1/46) Real Estate (3/113) Securities & Commodity Futures (2/42) Machinery (6/230) Nonferrous Metals (1/34) 1Adopted 2Decided to (3) Hitachi Metals (5) Iida Group Holdings (32) TOSEI (3) SBI Holdings (11) Monex Group (8) NSK (11) Hitachi Construction Machinery (21) MIURA (29) DMG MORI SEIKI (40) Hitachi Koki (54) TSUBAKI NAKASHIMA (14) Asahi Holdings 3Planning to (10) NTT URBAN DEVELOPMENT Market capitalization (A) Total market cap of industrial sector(b) JPY 0.5 trillion JPY 1.0 trillion JPY 0.3 trillion JPY 1.5 trillion JPY 0.05 trillion JPY 5.6 trillion JPY 14.1 trillion JPY 5.1 trillion JPY 22.7 trillion JPY 3.5 trillion (A/B) 9% 7% 7% 7% 2% 12

13 Ⅲ-4. IFRS Adoption by Industrial Sector Land Transportation (1/58) Construction (1/167) Other Products (1/108) 1Adopted 2Decided to 3Planning to Market capitalization (A) (21) Hitachi Transport System (33) DUNLOP SPORTS (26) TOSHIBA PLANT SYSTEMS & SERVICES JPY 0.2 trillion JPY 0.1 trillion JPY 0.03 trillion Total market cap of industrial sector(b) JPY 21.5 trillion JPY 15.2 trillion JPY 8.3 trillion (A/B) 1% 1% 0.4% 10 industrial sectors with no company transitioning to IFRS and size of industrial sector ( unit: companies ) Air Transportation Mining Fishery, Agriculture & Forestry Insurance Marine Transportation Electric Power & Gas Pulp & Paper Warehousing & Harbor Transportation Services Textiles & Apparels Banks

14 Ⅲ-5. IFRS Adoption Date The scheduled ion dates (including targeted) that "3 Companies planning to IFRS (22 companies)" have described in their Basic Policy are as follows. Adoption/Scheduled ion date (including quarters within the range) Companies that have ed IFRS Companies that have decided to IFRS Companies planning to IFRS Total ~ March April 2015 ~ March April 2016 ~ March April 2017 ~ March April 2018 ~ March April 2019 ~ TBD Total

Ⅲ-6. Stage of Progress Among "4 Companies Considering IFRS Adoption" Of the 213 companies that were considering IFRS ion, 158 companies described concrete matters in its Basic Policy.

15 Ⅲ-6. Stage of Progress Among "4 Companies Considering IFRS Adoption" Of the 213 companies that were considering IFRS ion, 158 companies described concrete matters in its Basic Policy. Many described "Preparation of manual and guidance. Preparation of manual and guidance 58 Impact studies/analysis 50 Analysis of differences in accounting standards 42 Acquisition of knowledge on accounting standards 38 Collecting information 34 Development of accounting policies Establishment of internal structure Consideration of transitioning process 5 Unification of closing dates 2 Others Note: Total exceeds 158 due to descriptions falling under multiple categories. 15

Analysis of Disclosure in Basic Policy Regarding Selection of Accounting Standards. Tokyo Stock Exchange, Inc.

Analysis of Disclosure in Basic Policy Regarding Selection of Accounting Standards Tokyo Stock Exchange, Inc. 1 I. Background Jun. 24, 2014 Japan Revitalization Strategy (Revised in 2014) 4) Promoting