Notice Concerning Recognition of
Gain on Step Acquisition Related to the Conversion of
PayPay Corporation into a Consolidated Subsidiary
(Update on Previously Disclosed Transaction)

1. Date of occurrence

November 2, 2022

2. Effect on earnings results

Due to the Consolidation, the Company expects to recognize a gain on step acquisition of 294,843 million yen in the three months ending December 31, 2022. The Company and its subsidiaries (hereinafter, the “Group”) previously accounted for transactions under common control based on the carrying amount of the parent company's assets and liabilities, and regardless of the actual date of the transaction under common control, retrospectively combined the financial statements of the transferred companies as if such transactions were executed by the Group on the later of the date when the parent obtained control of the transferred companies prior to the transfer, or the opening balance sheet date of the comparative period as part of the consolidated financial statements of the Group. However, the Group has now been listed for three years, conducting business with more focus on a large number of non-controlling interests and implementing corporate restructuring with autonomous management perspective and growth strategy. The consolidation of PayPay, a transaction under common control, is similar to business combinations under IFRS 3 in that it has a significant impact on a large number of non-controlling interests of the Group. Based on these grounds, the Group has considered that applying the acquisition method to transactions under common control involving non-controlling interests and reporting them in the financial statements as with business combinations subject to IFRS 3 will lead to the appropriate assessment of potential business value and provide relevant and reliable information to users of financial statements in making their economic decisions. For these reasons, the Group is to change the accounting policy to apply the acquisition method from the three months ending December 31, 2022, and the new accounting policy will be retrospectively applied to transactions under common control involving non-controlling interests.
In accordance with this change in accounting policy, accounting treatment will be retrospectively amended to the acquisition method to transactions under common control involving non-controlling interests, such as the consolidation of Yahoo Japan Corporation (currently, Z Holdings Corporation) by the Company implemented in June 2019. The Group expects that the cumulative effects arising from retrospective adjustments as of March 31, 2022 would include an increase in assets of 376,500 million yen, an increase in liabilities of 58,147 million yen and an increase in equity of 318,353 million yen. The Group also expects to record amortization of 23,328 million yen by recognizing identifiable intangible assets for the fiscal year ending March 31, 2023.

Since the initial accounting for the business combination is yet to be completed, the fair values of the acquired assets and liabilities are not disclosed.