Amortization of goodwill and equity method goodwill
Under U.S. GAAP, goodwill is not amortized and is tested for impairment periodically. Under Japanese GAAP, goodwill is amortized over certain
periods of less than 20 years using the straight-line method. Therefore, under U.S. GAAP, Income (loss) before income taxes was ¥2,620 million (higher) and ¥2,906 million (higher) for the nine months ended December 31,
2019 and 2020, respectively, and ¥607 million (higher) and ¥968 million (higher) for the three months ended December 31, 2019 and 2020, respectively.
Changes in the fair value of derivative contracts
Under U.S. GAAP, all derivative contracts, including derivative contracts that have been designated as hedges of specific assets or specific
liabilities, are carried at fair value, with changes in fair value recognized either in earnings or other comprehensive income. Under Japanese GAAP, derivative contracts that have been entered into for hedging purposes are carried at fair value with
changes in fair value, net of applicable income taxes, recognized generally in other comprehensive income.
Fair value for financial assets and
financial liabilities
Under U.S. GAAP, the fair value option may be elected for eligible financial assets and financial
liabilities which would otherwise be carried on a basis other than fair value (the fair value option). Where the fair value option is elected, the financial asset or financial liability is carried at fair value with changes in fair value
are recognized in earnings. Under Japanese GAAP, the fair value option is not permitted. Therefore, under U.S. GAAP, Income (loss) before income taxes was ¥1,889 million (higher) and ¥29,656 million (higher) for the nine
months ended December 31, 2019 and 2020, respectively and ¥6,663 million (lower) and ¥4,085 million (higher) for the three months ended December 31, 2019 and 2020, respectively. In addition,
non-marketable equity securities which are carried at fair value under U.S. GAAP applicable to broker-dealers are carried at cost less impairment loss under Japanese GAAP.
Offsetting of amounts related to certain contracts
Under U.S. GAAP, an entity that is party to a master netting arrangement is permitted to offset fair value amounts recognized for the right to
reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments that have been offset under the same master netting arrangement. Under Japanese GAAP,
offsetting of such amounts is not permitted.
Stock issuance costs
Under U.S. GAAP, stock issuance costs are deducted from capital. Under Japanese GAAP, stock issuance costs are either immediately expensed or
capitalized as a deferred asset and amortized over periods of up to three years using the straight-line method.
Accounting for change in controlling
interest in a consolidated subsidiarys shares
Under U.S. GAAP, when a parents ownership interest decreases as a
result of sales of a subsidiarys common shares by the parent, and the subsidiary becomes an equity method investee, the parents remaining investment in the former subsidiary is measured at fair value as of the date of loss of a
controlling interest and a related valuation gain or loss is recognized in earnings. Under Japanese GAAP, the remaining investment on the parents consolidated balance sheet is computed as the sum of the carrying amount of investment in the
equity method investee recorded in the parents stand-alone balance sheet as adjusted for the share of net income or losses and other adjustments from initial acquisition through to the date of loss of a controlling interest multiplied by the
ratio of the remaining shareholding percentage against the holding percentage prior to loss of control.
Stock-based and other compensation
awards
Under U.S.GAAP, Restricted Stock Units (RSUs) are classified as equity awards, and the total compensation
cost is measured based on the fair value of the Companys common stock on the grant date. Under Japanese GAAP, the total compensation cost of RSUs is measured by the amount of monetary compensation liabilities which is granted to management and
employees. Therefore, under U.S. GAAP, Income (loss) before income taxes was ¥562 million (lower) and ¥119 million (lower) for the nine months ended December 31, 2019 and 2020, respectively and ¥143 million
(higher) and ¥214 million (higher) for the three months ended December 31, 2019 and 2020, respectively.
Use of estimates
The Company tests for other than temporary impairment on its equity method investments on a quarterly basis. At December 31, 2020, there
is an equity method investment where the share price is lower than the carrying value. The carrying value of the equity method investment is ¥215,026 million at December 31, 2020. Based on the quoted share price, the fair value at
December 31, 2020 is below the Companys carrying value by 31.2%.
Considering the financial condition and performance as well
as the period and extent to which the share price was below carrying value, the Company determined the impairment was not other-than-temporary and therefore no impairment loss were recognized through earnings during the period. The Company will
continue to evaluate this investment and may subsequently conclude the reduction in fair value is other-than-temporary and impair our investment if market conditions do not sustainably improve in the near future.
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