Consolidated Financial Statements 2025

Consolidated Financial Statements 2025

As of and for the Year Ended February 28, 2025, and Independent Auditor’s Report

Independent Auditor’s Report

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, 2025, 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, 2025, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.

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.

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.

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.

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.

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.

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.

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.

• 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, actions taken to eliminate threats or safeguards applied.

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.

Fees for audit and other services for the year ended February 28, 2025, which were charged by us and our network firms to Furuno Electric Co., Ltd. and its subsidiaries were ¥128 million and ¥15 million, respectively.

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 25, 2025

Consolidated Balance Sheet

FURUNO ELECTRIC CO., LTD. and Consolidated Subsidiaries February 28, 2025

885 789 5,913

TOTAL ¥123,519 ¥114,409 $825,275

See notes to consolidated financial statements.

LIABILITIES AND EQUITY Millions of Yen

Thousands of

U.S. Dollars (Note 1)

2025 2024 2025

COMMITMENTS AND CONTINGENT LIABILITIES (Note 17)

EQUITY (Note 12):

Common stock—authorized,

TOTAL ¥123,519 ¥114,409 $825,275

Consolidated Statement of Income

FURUNO ELECTRIC CO., LTD. and Consolidated Subsidiaries Year Ended February 28, 2025

PER SHARE OF COMMON STOCK (Note 19): Yen U.S. Dollars

2025 2024 2025

Basic net income ¥ 362.64 ¥ 197.61 $ 2.42

Cash dividends applicable to the year 110.00 60.00 0.73

See notes to consolidated financial statements.

Consolidated Statement of Compr ehensive Income

FURUNO ELECTRIC CO., LTD. and Consolidated Subsidiaries Year Ended February 28, 2025

Millions of Yen

Thousands of

U.S. Dollars (Note 1)

2025 2024 2025

NET INCOME ¥11,575 ¥ 6,230 $77,336

OTHER COMPREHENSIVE INCOME (Note 18):

Unrealized gain on available-for-sale securities 283 662 1,890

Foreign currency translation adjustments 1,833 2,562 12,246

Defined retirement benefit plans (33) 532 (220)

Share of other comprehensive income of an associate accounted for by the equity method

(11) 23 (73)

Total other comprehensive income 2,072 3,780 13,843 COMPREHENSIVE INCOME ¥13,648 ¥10,011 $91,187

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:

Owners of the parent ¥13,528 ¥10,007 $90,385

Noncontrolling interests 119 4 795

See notes to consolidated financial statements.

Consolidated Statement of Changes in Equity

FURUNO ELECTRIC CO., LTD. and Consolidated Subsidiaries Year Ended February 28, 2025

Thousands Millions of Yen

Accumulated Other Comprehensive Income

Number of Shares of Common Stock

Common

Capital

Retained

Unrealized Gain on Available-for-

Treasury Sale

Foreign Currency Translation

Defined Retirement

Noncontrolling

Total

Outstanding

Stock

Surplus

Earnings

Stock Securities

Adjustments

Benefit Plans Total

Interests

Equity

Thousands of U.S. Dollars (Note 1)

Accumulated Other Comprehensive Income

Unrealized Gain on

Foreign Currency

Defined

Common

Capital

Retained

Treasury Available-for-Sale Translation

Retirement

Noncontrolling

Total

Stock

Surplus

Earnings

Stock Securities Adjustments

Benefit Plans Total

Interests

Equity

See notes to consolidated financial statements.

Consolidated Statement of Cash Flows

FURUNO ELECTRIC CO., LTD. and Consolidated Subsidiaries Year Ended February 28, 2025

Millions of Yen

Thousands of

U.S. Dollars (Note 1)

Notes to Consolidated Financial Statements

FURUNO ELECTRIC CO., LTD. and Consolidated Subsidiaries Year Ended February 28, 2025

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of IFRS Accounting Standards.

In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2024 consolidated financial statements to conform to the classifications used in 2025.

The consolidated financial statements are stated in Japanese yen, the currency of the country in which Furuno Electric Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥149.67 to $1, the approximate rate of exchange at February 28, 2025. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

As permitted under the Financial Instruments and Exchange Act of Japan, figures less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial statements do not necessarily agree with the sum of the individual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Consolidation — The consolidated financial statements as of February 28, 2025, include the accounts of the Company and its 35 significant (35 in 2024) subsidiaries (together, the “Group”).

   Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.

   Investments in an associated company are accounted for by the equity method.

   Investments in 1 (1 in 2024) unconsolidated subsidiary and 1 (1 in 2024) other associated company are stated at cost. The application of consolidation or the equity method of accounting for these investments would not have a material impact on the accompanying consolidated financial statements.

   Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary company at the date of acquisition. Goodwill is reported in the balance sheet and is amortized using the straight-line method over reasonably estimated periods (5 to 18 years) in which economic benefits are expected to be realized.

   All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is also eliminated.

   Of overseas consolidated subsidiaries, 3 subsidiaries’ fiscal year-end dates are November 30 and 28 subsidiaries’ fiscal year-end dates are December 31.

   In preparing the consolidated financial statements, financial statements of each company as of their fiscal closing dates are used. However, adjustments necessary for consolidation are made for significant transactions that occurred during the consolidation period.

2. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements — Under Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task Force (“PITF”) No. 18, “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,” the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either IFRS Accounting Standards or generally accepted accounting principles in the United States of America (Financial Accounting Standards Board Accounting Standards Codification) (“U.S. GAAP”) tentatively may be used

   for the consolidation process, except for the following items that should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are not material; (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting; and (e) recording a gain or loss through profit or loss on the sale of an investment in an equity instrument for the difference between the acquisition cost and selling price, and recording impairment loss through profit or loss for other-than-temporary declines in the fair value of an investment in an equity instrument, where a foreign subsidiary elects to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument.

3. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method — ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments,” requires adjustments to be made to conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate’s financial statements are used in applying the equity method, unless it is impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either IFRS Accounting Standards or U.S. GAAP tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting; and (e) recording a gain or loss through profit or loss on the sale of an investment in an equity instrument for the difference between the acquisition cost and selling price, and recording impairment loss through profit or loss for other-than-temporary declines in the fair value of an investment in an equity instrument, where a foreign associate elects to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument.

4. Business Combinations — Business combinations are accounted for using the purchase method. Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the periods in which the costs are incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date. The acquirer recognizes any bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after a review of the procedures used in the purchase price allocation. A parent’s ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus as long as the parent retains control over its subsidiary.

5. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash and exposed to insignificant risk of changes in value. Cash equivalents include time deposits, certificates of deposit, commercial paper and bond funds, all of which mature or become due within three months of the date of acquisition.

6. Allowance for Doubtful Accounts — The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Group’s past credit loss experience and an evaluation of potential losses in the receivables outstanding.

7. Inventories — Inventories are stated at the lower of cost, principally determined by the average method, or net selling value.

8. Investment Securities — The Company and its domestic consolidated subsidiaries categorize their existing securities as available-for-sale securities.

   Securities other than those that do not have a market price, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. The cost of securities sold is mainly calculated using the moving-average method.

   Those that do not have a market price are stated at cost, determined by the moving-average method.

9. Property, Plant and Equipment — Property, plant and equipment are carried at cost. Depreciation of property, plant and equipment is computed principally by the declining-balance method.

10. Long-Lived Assets — The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

11. Product Warranty Costs — The Group establishes a liability for estimated product warranty costs at the time of sale. Estimates for accrued product warranty costs are primarily based on historical experience.

12. Significant Revenue and Expenses — The details of the main performance obligations in the major businesses related to revenue from contracts with the Company’s customers and the timing at which the Company typically satisfied these performance obligations (when it typically recognizes revenue) are as follows:

    1. Marine business

       In the Marine business, the Group mainly manufactures and sells navigation equipment, fishing equipment and radio communication equipment, etc.

    2. Industrial business

       In the Industrial business, the Group mainly manufactures and sells medical equipment, ITS equipment, GPS equipment, and avionics electronic equipment, etc.

    3. Wireless LAN / Handy Terminal business

       In the Wireless LAN / Handy Terminal business, the Group mainly manufactures and sells handy terminals.

    4. Other business

       In the Other business, the Group is mainly engaged in the electromagnetic environmental testing business.

       In each business, revenue is generally recognized when these products are delivered to the customers or accepted by the customers, with the exception of domestic sales where revenue is recognized upon shipment since the time period from shipment until the transfer of control over the products to the customers is typically a short period.

       For repairing services in the marine business and jobbing production transactions in the industrial business, performance obligations are deemed to be satisfied over time and revenue is recognized based on the percentage of completion method. The outcome of construction contracts is measured based on the proportion of construction costs incurred by the end of the reporting period to the total expected construction costs. In some cases, the Group may

       not be able to reasonably measure the outcome of the performance obligation, but expects to recover the costs incurred to satisfy the performance obligations. In those circumstances, the Company recognizes revenue only to the extent of the costs incurred. For a construction contract whose performance obligations are expected to be satisfied within a short period, the Company applies an alternative method and recognizes revenue when the performance obligations are completely satisfied instead of recognizing revenue over time.

       For any of the above businesses, if the delivery of products involves installation, performance obligations are identified for the installation and delivery of products separately and revenue is recognized as mentioned above.

13. Retirement and Pension Plans — The Company and certain consolidated subsidiaries have lump-sum severance indemnity plans, defined contribution pension plans and contributory funded defined benefit pension plans, which are pursuant to the Japanese Welfare Pension Insurance Law.

    The Company accounts for liabilities for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis. Actuarial gains and losses are amortized on a straight-line basis over 10 years within the average remaining service period of employees commencing from the following year after incurrence.

    Certain consolidated subsidiaries adopt a simplified method under which the retirement benefit amount required to be paid if all the employees retired on the balance sheet date is considered as the projected benefit obligations in computing liabilities for retirement benefits and net periodic benefit costs.

14. Asset Retirement Obligations — An asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development, and normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

15. Research and Development Costs — Research and development costs are charged to income as incurred.

16. Income Taxes — The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.

17. Adoption of the Group Tax Sharing System — The Company and its domestic consolidated subsidiaries have adopted the Group Tax Sharing System, and are accounting for national and local income taxes and the related tax effect in accordance with the “Practical Solution on the Accounting and Disclosure under the Group Tax Sharing System” (PITF No. 42, August 12, 2021).

18. Foreign Currency Transactions — All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts.

19. Foreign Currency Financial Statements — The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation are shown as “Foreign currency translation adjustments” and also allocated to “Noncontrolling interests” in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate.

20. Derivatives and Hedging Activities — The Group uses derivative financial instruments to manage exposures to fluctuations in interest rates. Interest rate swaps are utilized to reduce the interest rate risks of long-term debts. The Group does not enter into derivatives for trading or speculative purposes.

    Derivative financial instruments are classified and accounted for as follows: (a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statement of income; and (b) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions in principle.

    The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements is recognized and included in interest expense or income.

21. Per Share Information — Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period.

    Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective fiscal years, including dividends to be paid after the end of the year.

22. New Accounting Pronouncements

    Accounting Standard for Current Income Taxes, Accounting Standard for Presentation of Comprehensive Income and Implementation Guidance on Accounting Standard for Tax Effect Accounting

    On October 28, 2022, the ASBJ issued the following statements and guidance:

    • Accounting Standard for Current Income Taxes (ASBJ Statement No. 27, October 28, 2022)

    • Accounting Standard for Presentation of Comprehensive Income (ASBJ Statement No. 25, October 28, 2022)

    • Implementation Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28, October 28, 2022)

    1. Overview

       These standards and guidance define the accounting classifications for current income taxes when other comprehensive income is subject to income taxes and tax effect accounting for sales of shares of subsidiaries when the group taxation system is applied.

    2. Date of adoption

       The Group expects to adopt these accounting standards from the beginning of the year ending February 28, 2026.

    3. Impact of the adoption of the accounting standards

       The impact of the adoption of these accounting standards is under evaluation at the time of preparation of the accompanying consolidated financial statements.

       Accounting for and Disclosure of Current Taxes Related to the Global Minimum Tax Rules

       On March 22, 2024, the ASBJ issued the following practical solution:

       • Accounting for and Disclosure of Current Taxes Related to the Global Minimum Tax Rules (ASBJ Practical Solution No. 46, March 22, 2024)

         1. Overview

            This practical solution defines the accounting for and disclosure of current taxes related to the Global Minimum Tax Rules.

         2. Date of adoption

            The Group expects to adopt this practical solution from the beginning of the year ending February 28, 2026.

         3. Impact of the adoption of the accounting standards

            The impact of the adoption of these accounting standards is under evaluation at the time of preparation of the accompanying consolidated financial statements.

            Accounting Standard for Leases and Implementation Guidance on Accounting Standard for Leases

            On September 13, 2024, the ASBJ issued the following statements and guidance:

            • Accounting Standard for Leases (ASBJ Statement No. 34, September 13, 2024)

            • Implementation Guidance on Accounting Standard for Leases (ASBJ Guidance No. 33, September 13, 2024)

         The ASBJ also issued other Accounting Standards, Implementation Guidance, Practical Solutions, and Transferred Guidance, which were revised by the issuance of the Accounting Standard for Leases.

         1. Overview

            These accounting standards define the same accounting treatments as international accounting standards, which require lessees to recognize assets and liabilities for all leases.

         2. Date of adoption

            The Group expects to adopt these accounting standards from the beginning of the year ending February 28, 2029.

         3. Impact of the adoption of the accounting standards

         The impact of the adoption of these accounting standards is under evaluation at the time of preparation of the accompanying consolidated financial statements.

23. Changes in Presentation Consolidated Balance Sheet

“Insurance funds,” which had been separately presented under “Investments and other assets,” and “Long-term accounts payable,” which had been separately presented under “ Long-term liabilities” in the previous fiscal year, are included in “Other assets,” and “Other long-term liabilities” from the year ended February 28, 2025, respectively, due to the decreased materiality. “Allowance for doubtful accounts,” which had been included in “Other assets” under “Investments and other assets,” and “Lease obligations,” which had been included in “Other long-term liabilities” under “Long-term liabilities” in the previous fiscal year, are separately presented from the year ended February 28, 2025, due to the increased materiality. To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.

As a result, ¥1,261 million included in “Other assets” and ¥361 million included in “Insurance funds” under “Investments and other assets,” have been reclassified to ¥(15) million of “Allowance for doubtful accounts” and ¥1,638 million of “Other assets,” while ¥1,770 million included in “Other long-term liabilities” and ¥154 million included in “Long-term accounts payable” under “Long-term liabilities” in the consolidated balance sheet as of February 29, 2024, have been reclassified to ¥1,038 million of “Lease obligations” and ¥887 million of “Other longterm liabilities,” respectively.

Consolidated Statement of Income

“Surrender value of insurance,” which had been separately presented under “Other income (expenses)” in the previous fiscal year, is included in “Other—net” from the year ended February 28, 2025, due to the decreased materiality. To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.

As a result, ¥48 million included in “Surrender value of insurance” and ¥282 million included in “Other—net” under “Other income (expenses)” in the consolidated statement of income for the previous fiscal year, have been reclassified to ¥330 million of “Other—net.”

Consolidated Statement of Cash Flows

“(Decrease) increase in allowance for doubtful accounts” and “Increase in provision for bonuses” under “Changes in assets and liabilities,” of “Operating activities,” which had been included in “Other—net” in the previous fiscal year, are separately presented from the year ended February 28, 2025, due to the increased materiality. “Interest and dividends—received,” “Interest—paid,” “Interest and dividend income,” and “Interest expenses” of “Operating activities,” which had been included in “Other—net” in the previous fiscal year, are separately presented from the year ended February 28, 2025, due to the increased materiality. “Payments into time deposits” and “Proceeds from withdrawal of time deposits” under “Investing activities,” which had been included in “Increase in other assets” in the previous fiscal year, are separately presented from the year ended February 28, 2025, due to the increased materiality. To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.

As a result, ¥1,352 million included in “Other—net” under “Operating activities” in the consolidated statement of cash flows for the previous fiscal year, has been reclassified to ¥51 million of “(Decrease) increase in allowance for doubtful accounts,” ¥434 million of “Increase in provision for bonuses,” ¥309 million of “Interest and dividends—received,” ¥(65) million of “Interest—paid,” ¥(251) million of “Interest and dividend income,” ¥132 million of “Interest expenses,” and ¥740 million of “Other—net.” ¥(273) million included in “Increase in other assets” under “Investing activities” has been reclassified to ¥(43) million of “Payments into time deposits,” ¥131 million of “Proceeds from withdrawal of time deposits,” and ¥(361) million of “Increase in other assets.”

3. SIGNIFICANT ACCOUNTING ESTIMATES

Accounting estimates are recorded at the reasonable amounts computed based on information available at the time of preparation of the consolidated financial statements.

The item whose amounts were recorded based on accounting estimates in the consolidated financial statements for the year ended February 28, 2025, that may have a significant impact on the consolidated financial statements for the following fiscal year is as follows:

Recoverability of Deferred Tax Assets

1. Amounts recorded in the consolidated financial statements for the years ended February 28, 2025 and February 29, 2024

   Millions of Yen

   Thousands of

   U.S. Dollars

   	2025	2024		2025
   Deferred tax assets	¥1,638	¥1,300		$10,944

   The amount recorded as deferred tax assets refers to the amount after offsetting against deferred tax liabilities and deducting valuation allowance.

2. Information about the details of significant accounting estimates on the identified item Deferred tax assets are recognized to the extent that it is considered to have effects to reduce future tax burdens through the reversal of deductible temporary differences or the offsetting of tax loss carryforwards against taxable income.

Recoverability of deferred tax assets is determined based on estimation of future taxable income and tax planning. Future taxable income is estimated based on the Group’s business plans. Forecasts of sales and cost of sales used in the business plans include significant assumptions, such as amounts of orders received and production outputs and foreign exchange rates. Therefore, when the assessment of recoverability of deferred tax assets changes due to any variations in these significant assumptions, it might have an impact on the consolidated financial statements for the following fiscal year.

4. BUSINESS COMBINATION

Year Ended February 28, 2025

(Finalization of the Provisional Accounting Treatment for Business Combinations)

In the previous fiscal year, the business combination with SARL ROBIN MARINE, which was conducted on July 4, 2023, had been subject to provisional accounting treatment. The accounting treatment was finalized in the fiscal year ended February 28, 2025.

With the finalization of the provisional accounting treatment, the comparative information included in the consolidated financial statements for the fiscal year ended February 28, 2025, reflected a significant revision of the initial allocation of acquisition costs. As a result, in the consolidated balance sheet as of February 29, 2024, goodwill decreased by ¥104 million, while other intangible assets included in other assets under investments and other assets, deferred tax liabilities and retained earnings increased by ¥143 million, ¥37 million and ¥1 million, respectively. In the consolidated statement of income for the fiscal year ended February 29, 2024, selling, general and administrative expenses decreased by ¥1 million, while operating income and income before income taxes increased by ¥1 million, respectively.

5. SHORT-TERM INVESTMENTS

Short-term investments as of February 28, 2025 and February 29, 2024, consisted of the following:

Millions of Yen

Thousands of

U.S. Dollars

6. RECEIVABLES FROM CONTRACTS WITH CUSTOMERS

Receivables from contracts with customers included in “Notes receivable—trade,” “Accounts receivable—trade” and “Contracts assets” as of February 28, 2025 and February 29, 2024, are as follows:

Millions of Yen

Thousands of

U.S. Dollars

Investment securities as of February 28, 2025 and February 29, 2024, consisted of the following:

Thousands of

Millions of Yen U.S. Dollars

The costs and aggregate fair values of investment securities at February 28, 2025 and February 29, 2024, were as follows:

Millions of Yen

February 28, 2025 Cost

Securities classified as: Available-for-sale:

Unrealized Gains

Unrealized Losses

Fair Value

February 29, 2024

Securities classified as: Available-for-sale:

Thousands of U.S. Dollars

February 28, 2025 Cost

Securities classified as: Available-for-sale:

Unrealized Gains

Unrealized Losses

Fair Value

Available-for-sale securities whose fair value is not readily determinable as of February 28, 2025 and February 29, 2024, were as follows:

Carrying Amount

Thousands of

Millions of Yen U.S. Dollars

Available-for-sale securities sold for the years ended February 28, 2025 and February 29, 2024, were as follows:

Year Ended February 28, 2025

Securities classified as: Available-for-sale:

Amount of Sales

Millions of Yen Gain on Sales

Loss on Sales

Year Ended February 29, 2024

Securities classified as: Available-for-sale:

Others ¥0

Total ¥0

Thousands of U.S. Dollars

Year Ended February 28, 2025

Securities classified as: Available-for-sale:

Amount of Sales

Gain on Sales

Loss on Sales

For the years ended February 28, 2025 and February 29, 2024, the Company recognized loss on revaluation of investment securities (equity securities classified as available-for-sale) in an amount of ¥22 million ($146 thousand) and ¥7 million, respectively.

Inventories at February 28, 2025 and February 29, 2024, consisted of the following:

Millions of Yen

Thousands of

U.S. Dollars

The Group reviewed its long-lived assets for impairment as of February 28, 2025 and February 29, 2024. As a result, the Group recognized impairment losses of ¥43 million ($287 thousand) and ¥12 million, respectively, as other expenses. These impairment losses primarily related to long-lived assets of the Industrial Business for the year ended February 28, 2025, and the Marine Business and the Industrial Business for the year ended February 29, 2024, due to continuing operating losses in the divisions. Recoverable amounts of these assets were measured in terms of the value in use. However, since future cash flows are not expected, the value in use is calculated as zero.

10. SHORT-TERM BANK LOANS, LONG-TERM DEBTS AND LEASE OBLIGATIONS

Short-term bank loans at February 28, 2025 and February 29, 2024, consisted of notes to banks and bank overdrafts. The weighted-average interest rates applicable to the short-term bank loans were 0.37% and 0.24% at February 28, 2025 and February 29, 2024, respectively.

Long-term debts at February 28, 2025 and February 29, 2024, consisted of the following:

Thousands of

Millions of Yen U.S. Dollars

average interest rates from 0.45% to 0.76% (2025) and from 0.43% to 0.56% (2024)

Less current portion (3,006) (3,208) (20,084)

Long-term debts, less current portion ¥ 8,702 ¥ 8,207 $ 58,141

Lease obligations with due dates leading up to March 2067 with an average interest rate of 2.46% and 3.00% at February 28, 2025 and February 29, 2024, respectively, are included in “Other long-term liabilities,” excluding current portion which is included in “Other current liabilities.”

Annual maturities of long-term debts and lease obligations at February 28, 2025, were as follows:

     Millions of Yen      

Thousands of

U.S. Dollars

The carrying amounts of assets pledged as collateral for bank loans at February 28, 2025 and February 29, 2024, were as follows, although there were no corresponding obligations:

Millions of Yen

Thousands of

U.S. Dollars

As is customary in Japan, the Company maintains substantial deposit balances with banks with which it has borrowings. Such deposit balances are not legally or contractually restricted as to withdrawal.

General agreements with respective banks provide, as is customary in Japan, that additional collateral must be provided under certain circumstances if requested by such banks and that certain banks have the right to offset cash deposited with them against any long-term or short-term debts or obligation that becomes due and, in case of default and certain other specified events, against all other debts payable to the banks. The Company has never been requested to provide any additional collateral.

11. RETIREMENT AND PENSION PLANS

The Company and certain consolidated subsidiaries have severance payment plans for employees. Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance payment from the Company or from certain consolidated subsidiaries and annuity payments from a trustee. Under certain situation, employees are entitled to receive additional payments if the termination is by voluntary retirement at earlier ages prior to the mandatory retirement age.

The Company and certain consolidated subsidiaries have contributory funded defined benefit pension plans and unfunded retirement benefit plans for employees. Certain overseas consolidated subsidiaries have defined retirement benefit plans or defined retirement contribution plans.

Certain consolidated subsidiaries adopt the simplified method in determining retirement benefit obligations.

a. Defined Benefit Plans (Including Plans to Which the Simplified Method Is Applied)

1. The changes in defined benefit obligations for the years ended February 28, 2025 and February 29, 2024, were as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   	2025	2024		2025
   Balance at beginning of year	¥13,653	¥14,134		$91,220
   Current service cost	569	546		3,801
   Interest cost	133	139		888
   Actuarial losses (gains)	184	(3)		1,229
   Benefits paid	(1,097)	(1,304)		(7,329)
   Others	101	141		674
   Balance at end of year	¥13,545	¥13,653		$90,499

2. The changes in plan assets for the years ended February 28, 2025 and February 29, 2024, were as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   	2025	2024		2025
   Balance at beginning of year	¥12,126	¥12,081		$81,018
   Expected return on plan assets	242	251		1,616
   Actuarial gains	24	472		160
   Contributions from the employer	311	305		2,077
   Benefits paid	(841)	(983)		(5,619)
   Balance at end of year	¥11,863	¥12,126		$79,261

3. Reconciliations between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligations and plan assets were as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   	2025	2024		2025
   Funded defined benefit obligation	¥ 10,215	¥10,441		$ 68,250
   Plan assets	(11,863)	(12,126)		(79,261)
   Total	(1,647)	(1,685)		(11,004)
   Unfunded defined benefit obligation	3,329	3,211		22,242
   Net liability arising from defined benefit obligation	¥ 1,682	¥ 1,526		$ 11,238
   	Millions	of Yen		Thousands of U.S. Dollars
   	2025	2024		2025
   Liability for retirement benefits	¥ 3,329	¥ 3,211		$ 22,242
   Asset for retirement benefits	(1,647)	(1,685)		(11,004)
   Net liability arising from defined benefit obligation	¥ 1,682	¥ 1,526		$ 11,238

4. The components of net periodic benefit costs for the years ended February 28, 2025 and February 29, 2024, were as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   	2025	2024		2025
   Service cost	¥ 569	¥ 546		$ 3,801
   Interest cost	133	139		888
   Expected return on plan assets	(242)	(251)		(1,616)
   Amortization of actuarial differences	92	248		614
   Periodic benefit cost calculated by the simplified method	101	89		674
   Others	41	35		273
   Net periodic benefit costs	¥ 695	¥ 807		$ 4,643

5. Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended February 28, 2025 and February 29, 2024, were as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   	2025	2024		2025
   Actuarial differences	¥(67)	¥724		$(447)
   Total	¥(67)	¥724		$(447)

6. Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of February 28, 2025 and February 29, 2024, were as follows:

   Millions of Yen

   Thousands of

   U.S. Dollars

   	2025	2024		2025
   Unrecognized actuarial differences	¥366	¥299		$2,445
   Total	¥366	¥299		$2,445

7. Plan assets

   1. Components of plan assets

      Plan assets as of February 28, 2025 and February 29, 2024, consisted of the following:

      	2025	2024
      Debt investments	43%	41%
      Equity investments	26	26
      Cash and cash equivalents	0	0
      General account assets of life insurance	24	25
      Others	7	8
      Total	100%	100%

   2. Method of determining the expected rate of return on plan assets

      The expected rate of return on plan assets is determined by considering the long-term rates of return which are expected currently and in the future from the various components of the plan assets.

8. Assumptions used for the years ended February 28, 2025 and February 29, 2024, were set forth as follows:

The amount of required contribution to the defined contribution plans of the Company and certain consolidated subsidiaries for the years ended February 28, 2025 and February 29, 2024, was ¥529 million ($3,534 thousand) and ¥458 million, respectively.

12. EQUITY

Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

1. Dividends

   Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain criteria including (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of the directors being prescribed as one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company does not meet all the above criteria.

   Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

2. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus

   The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account charged upon the payment of such dividends until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts within equity under certain conditions upon resolution of the shareholders.

3. Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock.

13. INCOME TAXES

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 30.6% for the years ended February 28, 2025 and February 29, 2024.

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at February 28, 2025 and February 29, 2024, are as follows:

                                                                                 Millions of Yen      

Thousands of

U.S. Dollars

Notes:

1. Valuation allowance decreased by ¥368 million ($2,458 thousand) mainly because the valuation allowance for tax loss carryforwards of the Company decreased, and the valuation allowance relating to elimination of unrealized profit decreased.

2. The expiration of tax loss carryforwards, the related valuation allowances and the resulting net deferred tax assets as of February 28, 2025 and February 29, 2024, were as follows:

February 28, 2025

Not applicable.

or Less

February 29, 2024 1 Year

After 1 Year through 2 Years

After 2 Years through 3 Years

Millions of Yen After

3 Years

through 4 Years

After 4 Years through 5 Years

After

5 Years Total

Deferred tax assets relating to

tax loss carryforwards *a ¥ 12 ¥ 101 ¥ 113

Less valuation allowance for

tax loss carryforwards (12) (101) (113)

Net deferred tax assets relating to tax loss

carryforwards 0 0 *b

*a Deferred tax assets relating to tax loss carryforwards are computed by multiplying the normal effective statutory tax rate.

*b Net deferred tax assets recorded as of February 29, 2024, at ¥0 million are recognized for tax loss carryforwards of ¥113 million (computed by multiplying the normal effective statutory tax rate). These deferred tax assets as of February 29, 2024, are recognized for tax loss carryforwards of ¥0 million (computed by multiplying the normal effective statutory tax rate) recorded by FURUNO LIFEBEST CO., LTD., which is a consolidated subsidiary. No valuation allowance is provided for the portion that is deemed to be recoverable based on expected future taxable income.

The reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statement of income for the years ended February 28, 2025 and February 29, 2024, is as follows:

2025 2024

Normal effective statutory tax rate 30.6% 30.6%

Accounting for National and Local Income Taxes and the Related Tax Effect

The Company and its domestic consolidated subsidiaries have adopted the Group Tax Sharing System, and are accounting for national and local income taxes and the related tax effect in accordance with the “Practical Solution on the Accounting and Disclosure under the Group Tax Sharing System” (PITF No. 42, August 12, 2021).

Changes in Corporation Tax Rates, etc. after the Fiscal Closing Date

In accordance with the enactment of the “Act Partially Amending the Income Tax Act and Related Acts (Act No. 13 of 2025)” by the Diet on March 31, 2025, a new surtax (Special Defense Corporation Tax) with a tax rate of 4% imposed on the amount of corporation tax after deducting

¥5 million ($33 thousand) as the tax base will be established, effective for fiscal years beginning on or after April 1, 2026.

As a result, for the Company and its domestic consolidated subsidiaries, the normal effective statutory tax rate used to calculate deferred tax assets and deferred tax liabilities for temporary differences expected to be resolved in fiscal years beginning on or after March 1, 2027, will primarily be changed from 30.6% to 31.5%.

If the revised normal effective statutory tax rate were applied as of February 28, 2025, deferred tax assets, deferred tax liabilities, and unrealized gain on available-for-sale securities would decrease by ¥40 million ($267 thousand), ¥0 million ($0 thousand), and ¥18 million ($120 thousand), respectively, while income taxes—deferred and defined retirement benefit plans would increase by ¥21 million ($140 thousand) and ¥0 million ($0 thousand), respectively.

Selling, general and administrative expenses in the accompanying consolidated statement of income for the years ended February 28, 2025 and February 29, 2024, mainly consisted of the following:

Millions of Yen

Thousands of

U.S. Dollars

Research and development costs included in “SELLING, GENERAL AND ADMINISTRATIVE EXPENSES” were ¥6,303 million ($42,112 thousand) and ¥5,987 million for the years ended February 28, 2025 and February 29, 2024, respectively.

a. Status of Financial Instruments

(1) Group policy for financial instruments

The Group raises necessary funds to support its principal business plans to produce and sell marine electronic equipment and industrial electronic equipment. Cash surpluses, if any, are invested in low-risk financial assets. Short-term bank loans are used to fund ongoing operations. Derivatives are not used for speculative purposes, but to manage exposure to financial risks as described below.