TDK Electronics AGMünchenBefreiender Konzernabschluss gem. § 292 HGB
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| Business year | From April 1 to March 31 |
| Ordinary General Meeting of Shareholders | June |
| Record date | March 31 |
| Record dates for dividends from surplus | September 30 |
| March 31 | |
| Number of shares consisting one unit | 100 shares |
| Purchase demands or additional purchase requests of shares less than one unit: | |
| Office for handling business | (Special Account) |
| Stock Transfer Agency Business Planning Dept., Sumitomo Mitsui Trust Bank, Limited. | |
| 1-4-1 Marunouchi, Chiyoda-ku, Tokyo, Japan | |
| Administrator of shareholder registry | (Special Account) |
| Sumitomo Mitsui Trust Bank, Limited. | |
| 1-4-1 Marunouchi, Chiyoda-ku, Tokyo, Japan | |
| Forwarding office | - |
| Handling charge for purchase | Free of charge |
| Method of public notice | Electronic public notice will be made. However, if TDK is unable to make an electronic public notice due to an incident or any other compelling reason, it will make an alternative public notice in "The Nikkei" newspaper. The electronic public notice will be notified on TDK's website (https://www.jp.tdk.com/). |
| Special benefits for shareholders | None |
Note: 1.Pursuant to the provisions of TDK Corporation's Articles of Incorporation, the rights of holders of shares less than one unit are limited to the following: (i) rights listed in the items of Article 189, paragraph 2 of the Companies Act, (ii) rights to request to TDK Corporation in accordance with the provisions of Article 166, paragraph 1 of the same Act, (iii) rights to receive the allotment of the shares for subscription and the stock acquisition rights for subscription in accordance with the number of shares they hold, and (iv) rights to request to TDK Corporation to sell shares less than one unit.
2. As of April 1, 2021, the URL for the public notice has been changed to the following:
https://www.tdk.com/ja/index.html
TDK Corporation does not have a parent company.
No items to report
We have audited the accompanying consolidated financial statements of TDK Corporation. ("the Company") and its subsidiaries (collectively referred to as "the Group"), which comprise the consolidated balance sheets as at March 31, 2021 and 2020, the consolidated statements of income, the consolidated statements of comprehensive income (loss), the consolidated statements of equity and the consolidated statements of cash flows for the years then ended, and notes to consolidated financial statements. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at March 31, 2021 and 2020, and its consolidated financial performance and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
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 ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were 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 these matters.
| The key audit matter | How the matter was addressed in our audit |
| TDK Corporation (the "Company") and its subsidiaries recognized goodwill of ¥165,096 million on the consolidated balance sheet for the current fiscal year. As discussed in Note 19. "Goodwill and Other Intangible Assets" to the consolidated financial statements, ¥108,742 million of the above amount, representing approximately 4.5% of total assets, was allocated to a reporting unit that comprises the Sensor Application Products segment. | The primary procedures we performed to assess whether the Company's judgment with respect to the recognition of an impairment loss on goodwill allocated to the Sensor Application Products segment was appropriate included the following: |
| Goodwill is tested for impairment at least annually or whenever events or changes in circumstances indicate that the fair value of a reporting unit may be less than its carrying amount. When the fair value of a reporting unit is less than its carrying amount, an impairment loss is recognized. For the current fiscal year, the Company did not recognize any impairment loss on goodwill allocated to the Sensor Application Products segment. | (1) Internal control testing |
| The Sensor Application Products segment, consisting of the businesses of Temperature and Pressure Sensors, Magnetic Sensors, and MEMS Sensors, was newly established in April 2017. While the segment has been expanding its business areas mainly through acquisitions, it has not yet had any profitable year since its establishment, primarily due to a delay in new product development at InvenSense, Inc., a subsidiary that operates the MEMS Sensor business in the United States. The Company measured the fair value of this reporting unit by discounting the future cash flows at a discount rate calculated based on the weighted average cost of capital. The business plan of the Sensor Application Products segment, which formed the basis for estimating the future cash flows, reflected key assumptions adopted by management, including sales increases supported by the expansion of customer base and product applications, as well as a terminal growth rate for periods subsequent to the years included in the business plan. Accordingly, management's judgment thereon had a significant effect on the estimated future cash flows. In addition, in estimating a discount rate based on the weighted average cost of capital, which was another key assumption adopted by management, the selection of input data required a high degree of expertise in valuation. | We tested the design and operating effectiveness of certain of the Company's internal controls relevant to measuring the fair value used for the impairment testing on reporting units to which goodwill has been allocated. |
| We, therefore, determined that our assessment of the appropriateness of the Company's judgment as to whether an impairment loss should be recognized on goodwill allocated to the Sensor Application Products segment was one of the most significant in our audit of the consolidated financial statements for the current fiscal year, and accordingly, a key audit matter. | (2) Assessment of the reasonableness of the estimated fair value of the reporting unit |
| In order to assess the reasonableness of the estimated fair value of the Sensor Application Products segment, we: | |
| • Inquired of management about the rationale for the expansion of customer base and product applications, which supported the expected sales increases incorporated in the business plan of the Sensor Application Products segment, and then assessed the reasonableness of each assumption by comparing it with the market reports relevant to the businesses that comprised the Sensor Application Products segment; | |
| • assessed the reasonableness of the terminal growth | |
| rate for periods subsequent to the years included in the business plan of the Sensor Application Products segment with the assistance of valuation specialists within our network firms by comparing it with the long-term growth rates of major sales markets published by external organizations; | |
| • assessed the reasonableness of the discount rate calculated based on the weighted average cost of capital, with the assistance of the above valuation specialists, by evaluating the appropriateness of the calculation models and the selection of comparables used to determine input data, as well as by comparing the input data used by management with relevant data independently obtained by the valuation specialists from external organizations; and | |
| • analysed based on our understanding of the achievement status of the past business plan and the results of performing the above procedures, whether there was any potential effect on the judgment as to whether an impairment loss should be recognized on goodwill (i.e., a headroom analysis) when the effect of specific uncertainties were incorporated into the business plan, terminal growth rate or discount rate calculated based on the weighted average cost of capital. |
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America 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 the United States of America.
The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for overseeing the directors' performance of their duties with regard to the design, implementation and maintenance of 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 our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
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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, and 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. |
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Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Group's internal control. |
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Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
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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 presentation and disclosures in the consolidated financial statements are in accordance with accounting standards generally accepted in the United States of America, 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. |
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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 the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding, among other matters, the planned scope and timing of the audit, significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the 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 the 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.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2021 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 2 to the consolidated financial statements.
Our firm and its designated engagement partners do not have any interest in the Company and its subsidiaries which are required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
Yutaka Terasawa Designated Engagement Partner Certified Public Accountant Hiroto Yamane Designated Engagement Partner Certified Public Accountant Kohei Shingaki Designated Engagement Partner Certified Public Accountant KPMG AZSA LLC
Tokyo Office, Japan July 15, 2021
This is a copy of the Independent Auditor's Report and the original copies are kept separately by the Company and KPMG AZSA LLC.