SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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LINE Corporation
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(Registrant)
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May 10, 2018
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By: /s/ In Joon Hwang
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(Signature)
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Name: In Joon Hwang
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Title: Director and Chief Financial Officer
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LINE
Corporation Announces Consolidated Financial Results for the Three
Months Ended March 31, 2018
TOKYO--(BUSINESS WIRE)--May 10, 2018--LINE Corporation (NYSE:LN)
(TOKYO:3938) announces its consolidated financial results for the three
months ended March 31, 2018.
This is an English translation of the original Japanese-language
document. Should there be any inconsistency between the translation and
the original Japanese text, the latter shall prevail. All references to
the “Company,” “we,” “us,” or “our” shall mean LINE Corporation and,
unless the context otherwise requires, its consolidated subsidiaries.
Cautionary statement with respect to forward-looking statements, and
other information
This document contains forward-looking statements with respect to the
current plans, estimates, strategies and beliefs of the Company.
Forward-looking statements include, but are not limited to, those
statements using words such as “anticipate,” “believe,” “continues,”
“expect,” “estimate,” “intend,” “project,” “aim,” “plan,” “likely to,”
“target,” “contemplate,” “predict,” “potential” and similar expressions
and future or conditional verbs such as “will,” “would,” “should,”
“could,” “might,” “can,” “may,” or similar expressions generally
intended to identify forward-looking statements. These forward-looking
statements are based on information currently available to the Company,
speak only as of the date hereof and are based on the Company’s current
plans and expectations and are subject to a number of known and unknown
uncertainties and risks, many of which are beyond the Company’s control.
As a consequence, current plans, anticipated actions and future
financial position and results of operations may differ significantly
from those expressed in any forward-looking statements in the document.
You are cautioned not to unduly rely on such forward-looking statements
when evaluating the information presented and the Company does not
intend to update any of these forward-looking statements. Risks and
uncertainties that might affect the Company include, but are not limited
to:
i.
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its ability to attract and retain users and increase the level of
engagement of its users;
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ii.
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its ability to improve user monetization;
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iii.
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its ability to successfully enter new markets and manage its
business expansion;
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iv.
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its ability to compete in the global social network services market;
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v.
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its ability to develop or acquire new products and services, improve
its existing products and services and increase the value of its
products and services in a timely and cost-effective manner;
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vi.
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its ability to maintain good relationships with platform partners
and attract new platform partners;
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vii.
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its ability to attract advertisers to the LINE platform and increase
the amount that advertisers spend with LINE;
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viii.
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its expectations regarding its user growth rate and the usage of its
mobile applications;
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ix.
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its ability to increase revenues and its revenue growth rate;
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x.
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its ability to timely and effectively scale and adapt its existing
technology and network infrastructure;
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xi.
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its ability to successfully acquire and integrate companies and
assets;
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xii.
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its future business development, results of operations and financial
condition;
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xiii.
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the regulatory environment in which it operates;
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xiv.
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fluctuations in currency exchange rates and changes in the
proportion of its revenues and expenses denominated in foreign
currencies; and
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xv.
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changes in business or macroeconomic conditions.
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LINE Corporation
Index
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Cover
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A. Corporate information
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I. Corporate overview
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1.
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Selected consolidated financial data
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2.
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Business description
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II. Business
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1.
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Risk factors
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2.
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Material contracts
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3.
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Analysis of financial position, operating results and cash flow
position
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III. Company information
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1.
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Share information
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(1) Total number of shares
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(2) Stock acquisition rights
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(3) Exercises of bonds with stock acquisition rights with exercise
price amendment clause
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(4) Rights plans
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(5) Total number of shares issued, share capital, etc.
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(6) Principal shareholders
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(7) Voting rights
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2.
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Directors and executive officers
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IV. Accounting
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1.
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Interim condensed consolidated financial statements - Unaudited
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(1) Interim Condensed Consolidated Statement of Financial Position -
Unaudited
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(2) Interim Condensed Consolidated Statement of Profit or Loss -
Unaudited
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(3) Interim Condensed Consolidated Statement of Comprehensive Income
- Unaudited
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(4) Interim Condensed Consolidated Statement of Change in Equity -
Unaudited
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(5) Interim Condensed Consolidated Statement of Cash Flows -
Unaudited
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(6) Notes to Interim Condensed Consolidated Financial Statements -
Unaudited
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2.
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Others
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B.
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Information on guarantors
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A. Corporate information
I. Corporate overview
1.
Selected consolidated financial data
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Term
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18th term
Three months ended
March 31, 2017
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19th term
Three months ended
March 31, 2018
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18th term
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Accounting period
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From January 1,
2017 to
March 31, 2017
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From January 1,
2018 to
March 31, 2018
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From January 1,
2017 to
December 31, 2017
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Revenues
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(Millions of yen)
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38,916
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48,736
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167,147
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Profit/(loss) before tax from continuing operations
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(Millions of yen)
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3,566
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(138
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18,145
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Profit/(loss) for the period
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(Millions of yen)
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1,632
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(1,770
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8,210
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Profit/(loss) for the period attributable to the shareholders of the
Company
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(Millions of yen)
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1,437
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(1,383
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8,078
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Total comprehensive income/(loss) for the period, net of tax
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(Millions of yen)
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2,799
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(4,431
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11,743
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Equity attributable to the shareholders of the Company
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(Millions of yen)
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165,178
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181,095
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185,075
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Total assets
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(Millions of yen)
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258,263
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297,935
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303,439
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Basic profit/(loss) for the period per share attributable to the
shareholders of the Company
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(Yen)
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6.58
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(5.82
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36.56
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Diluted profit/(loss) for the period per share attributable to the
shareholders of the Company
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(Yen)
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6.07
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(5.82
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34.01
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Ratio of equity attributable to the shareholders of the Company to
total assets
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(%)
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64.0
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60.8
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61.0
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Net cash (used in)/provided by operating activities
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(Millions of yen)
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(5,031
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2,485
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10,965
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Net cash used in investing activities
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(Millions of yen)
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(2,055
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(18,055
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(34,230
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Net cash (used in)/ provided by financing activities
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(Millions of yen)
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(53
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204
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11,439
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Cash and cash equivalents at the end of the period
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(Millions of yen)
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127,591
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107,266
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123,606
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Notes:
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1.
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Trends in these selected financial data for the Company on a
stand-alone basis are not separately discussed as we prepare
quarterly consolidated financial statements.
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2.
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Revenues do not include consumption taxes.
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3.
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The above financial data were prepared based on the unaudited
interim condensed consolidated financial statements and the
consolidated financial statements prepared in accordance with
International Financial Reporting Standards (IFRS).
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4.
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As of March 31, 2018, equity attributable to the shareholders of
the Company and total assets held by the shareholders of the
Company increased as a result of the issuance of common stock for
the following reasons:
・
Exercise of stock
acquisition rights
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5.
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The Group has adopted IFRS 15 from fiscal year 2018. As the Group
has used the modified retrospective method upon adoption of IFRS 15,
the consolidated financial performance for the three-month period
ended March 31, 2017 is presented under the previous standard, IAS
18, while the consolidated financial performance for the three-month
period ended March 31, 2018 is presented under IFRS 15. Revenues for
the three-month period ended March 31, 2018 include an increase of
2,276 million yen due to the change in the accounting standards.
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2. Business description
During the three months ended March 31, 2018, there were no material
changes in the business of the Group (the Company or the principal
subsidiaries and affiliates of the Company).
Effective from the three months ended March 31, 2018, the Company has
reclassified its reportable segments. For more details, please refer to
Note 4. Segment Information of “1. (6) Notes to Interim Condensed
Consolidated Financial Statements – Unaudited” under “IV. Accounting.”
II. Business
1. Risk factors
During the three months ended March 31, 2018, there were no material
changes either regarding the occurrence of new operational risks or
regarding operational risks mentioned in the previous fiscal year’s
security report.
For readers of this English translation
: There were no material
changes from the information presented in the Risk Factors section of
the Company’s Annual Report on Form 20-F (File No. 001-37821) filed with
the Securities and Exchange Commission (the “SEC”) on March 30, 2018.
2. Material contracts
No important operational contracts, etc. were decided or entered into
during the three months ended March 31, 2018.
For readers of this English translation
: With respect to material
contracts, there were no material changes from the information presented
in the Company's Annual Report on Form 20-F (File No. 001-37821) filed
with the SEC on March 30, 2018.
3. Analysis of financial position, operating results and cash flow
position
The analysis of financial position, operating results and cash flow
position of the Group is as follows:
(1) Operating results
Consolidated financial results of the Group are calculated based on IFRS.
Results of operations
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Three months ended
March 31, 2017
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Three months ended
March 31, 2018
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Revenues
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38,916
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48,736
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Profit from operating activities
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4,025
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1,246
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Profit/(Loss) before tax for the period from continuing operations
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3,566
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(138)
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Profit/(Loss) for the period
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1,632
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(1,770)
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Profit/(Loss) for the period attributable to the shareholders of the
Company
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1,437
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(1,383)
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The revenues in the first three months ended March 31, 2018 was 48,736
million yen, an increase of 25.2% year on year. The Group has applied
IFRS 15 from January 1, 2018 and adopted the modified retrospective
method, not the full retrospective method. Thus, revenues include an
increase of 2,276 million yen due to changes in accounting standards.
The other major factor for increase in revenues was an increase of
advertising sales.
Profit from operating activities in the first three months ended March
31, 2018 was 1,246 million yen, a decline of 69.0% year on year. The key
factors for this decline included a 3,775 million yen increase in
employee compensation expenses in conjunction with an increase in
personnel and the introduction of an ESOP, the 3,122 million yen
increase in subcontract and other service expenses in association with
the development of AI assistant technology “Clova,” LINE Mobile
services, and development of LINE GAME contents, and the 3,133 million
yen increase in other operating expenses due to the increase in rent
payments and other factors. In addition, sales commission expenses
include an increase of 2,097 million yen due to the application of IFRS
15.
Profit from operating activities also includes the following factors:
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Dilution gain of 1,237 million yen due to third-party allotments by
the Group’s associates and joint ventures as the LINE Group’s
ownership ratios of these investments declined while carrying amounts
increased as a result of revaluation of the investments
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Re-measurement gain of 57 million yen on investments as the
investments became associates of the Group after acquiring control
Loss before tax for the period from continuing operations in the first
three months ended March 31, 2018 was 138 million yen, compared to
profit of 3,566 million yen in the same period of the previous year.
The
main factors were the aforementioned decline in profit from operating
activities and the increase in the share of loss of associates and joint
ventures.
Loss for the period in the first three months ended March 31, 2018 was
1,770 million yen, compared to profit of 1,632 million yen in the same
period of the previous year. The main factors for the loss for the
period include the aforementioned factors for the loss before tax for
the period from continuing operations, increase in deductible temporary
differences arising from increase in the share of loss of associates and
joint ventures which were not expected to be realized within the
foreseeable future, and the inability to recognize the related tax
benefits after being unable to recognize deferred tax assets despite the
posting of loss before tax on a standalone basis for some subsidiaries.
As a result of the above, loss for the period attributable to the
shareholders of the Company in the three months ended March 31, 2018 was
1,383 million yen, compared to profit of 1,437 million yen in the same
period of the previous year.
Profit and loss by segment
From the fiscal year 2018, the Group monitors its profit and loss by
segment. The profit and loss of each segment in fiscal year 2017 was
prepared mainly based on the same method as in fiscal year 2018 where
practicable and restated accordingly.
Moreover, as discussed above, the Group has applied IFRS 15 from January
1, 2018 and adopted the modified retrospective method, not the full
retrospective method. Accordingly, the 2017 financial statements and
segment information in the notes to the interim condensed consolidated
financial statements have not been restated for the adoption and
continue to be presented under the previous accounting standard, IAS 18.
Although the operating performance of FY2017 was prepared under the
previous accounting standard, the revenues and operating profit (loss)
for the three months ended March 31, 2017 presented in this section
below, as well as the year-on-year percentage changes in these measures,
are calculated based on FY2017 operating performance adjusted for the
gross recognition of advertising revenue based on IFRS 15. Thus, revenue
and operating expenses of the Core business and Strategic business for
the three-month period ended March 31, 2017 were increased by 1,734
million yen and 1 million yen, respectively, for the purposes of the
calculation of the year-on-year percentage changes in these measures.
The Group has made these adjustments to the 2017 segment revenues and
profit and loss in this section in order to provide a basis for
comparison of 2017 results to 2018 results. The adjustment includes the
most significant impact from our adoption of IFRS 15 related to
recording revenues related to advertising services on a gross basis
under IFRS 15 where they were recorded on a net basis under previous
accounting standards. However, there are certain other impacts due to
adoption of IFRS 15 that impact the timing of revenue, to a much lesser
degree, where it was not practicable for the Group to make adjustments
without undue cost and effort. Therefore, they are not entirely on a
comparable basis. However, the Group has determined that they have been
adjusted in a manner to provide a reasonable basis to discuss the trends
in these operating metrics below.
The LINE Group’s operating profits and losses by segment do not include
adjustments to other operating income or share-based compensation
expenses.
Core business
Revenues from core business for the first three months ended March 31,
2018 was 42,713 million yen, an increase of 14.1% year on year, and
profit from operating activities in this segment was 8,038 million yen,
an increase of 10.3% year on year.
The main factor for increases in revenue and profit for the core
business was an increase of advertising sales due to strong sales of
display ads (formerly performance ads).
Strategic business
Revenues from strategic business for the first three months ended March
31, 2018 was 6,063 million yen, an increase of 88.5% year on year, and
operating loss in this segment was 7,141 million yen, compared to
operating loss of 2,676 million yen in the first three months of the
previous year.
The main factor for the increase in revenues from strategic business was
the increase in revenues in conjunction with the steady acquisition of
customers for LINE Mobile. Increases in loss from operating activities
in strategic business was mainly due to increase in expenses related to
development of Clova and LINE Mobile services.
For more details of profit and loss by segment, see Note 4 of the Notes
to Interim Condensed Consolidated Financial Statements – Unaudited. As
the Group applied IFRS 15 retrospectively, figures in the Notes to the
Interim Condensed Consolidated Financial Statements – Unaudited are not
adjusted for the impact of IFRS 15 adoption.
(2) Cash flow position
The balance of cash and cash equivalents (hereinafter, "cash") as of
March 31, 2018 decreased by 16,340 million yen from the end of the
previous fiscal year to 107,266 million yen.
The respective cash flow positions are as follows.
Cash flows from operating activities
Net cash provided by operating activities was 2,485 million yen in the
first three months of 2018, compared to net cash used in operating
activities of 5,031 million yen in the first three months of 2017. Cash
provided by operating activities in the first three months of 2018
primarily consisted of an decrease of 3, 013 million yen in trade and
other receivables and adjustments for non-cash items including
depreciation and amortization expenses of 2,329 million yen. Cash used
in operating activities in the first three months of 2018 primarily
consisted of income taxes paid of 1,943 million yen and a decrease of
1,193 million yen in trade and other payables.
Cash flows from investing activities
Net cash used in investing activities was 18,055 million yen in the
first three months of 2018, compared to net cash used in investing
activities of 2,055 million yen in the first three months of 2017.
Factors affecting the cash outflows in the first three months of 2018
are primarily related to purchase of equity investments of 1,858 million
yen, acquisition of property and equipment and intangible assets of
4,668 million yen and purchase of investments in associates of 7,573
million yen. Factors affecting the cash inflows in the first three
months of 2018 are primarily related to proceeds from maturities of time
deposits of 1,080 million yen.
Cash flows from financing activities
Net cash provided by financing activities was 204 million yen in the
first three months of 2018, compared to net cash used in financing
activities of 53 million yen in the first three months of 2017. The cash
outflow in the first three months of 2018 are primarily related to
repayment of short-term borrowings of 66 million yen. Factors affecting
the cash inflows in the first three months of 2018 are primarily related
to proceeds from exercise of stock options of 272 million yen.
(3) Operational and financial issues to be addressed
During the three months ended March 31, 2018, there were no material
changes in operational and financial issues to be addressed by the Group.
(4) Research and development activities
There were no significant matters.
III. Company information
1. Share information
(1) Total number of shares
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a. Total number of shares authorized
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Total number of shares
authorized
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Class
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(Share)
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Common stock
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690,000,000
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Total
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690,000,000
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b. Number of shares issued
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Class
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Number of shares
issued as of end of
period
(Shares; as of
March
31, 2018)
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Number of shares
issued as of filing date
(Shares; as of May
10, 2018)
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Name of securities exchange
where the shares are traded or the
name of authorized financial
instruments firms association
where the shares are registered
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Details
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Common stock
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238,785,310
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240,020,642
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Tokyo Stock Exchange
(First Section) and
New York Stock Exchange
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100 shares constitute one "unit" of common stock.
Common
stock is stock with full voting rights and
not restricted by
any significant limitations
in terms of shareholders' rights.
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Total
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238,785,310
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240,020,642
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—
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Notes:
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1.
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“Number of shares issued as of filing date” does not include the
number of shares issued upon the exercise of the stock options
during the period from May 1, 2018 until the filing date of this
Quarterly Securities Report.
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2.
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The number of shares issued has increased by 1,172,332 due to
third-party allotment of new shares on April 25, 2018.
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(2) Stock acquisition rights
Not applicable.
(3) Exercises of bonds with stock acquisition rights with exercise
price amendment clause
Not applicable.
(4) Rights plans
Not applicable.
(5) Total number of shares issued, share capital, etc.
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Date
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Change in the
number
of shares issued
(Shares)
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Balance of shares
issued
(Shares)
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Change in share
capital
(Millions of yen)
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Balance of
share capital
(Millions of yen)
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Change in legal
capital reserve
(Millions of yen)
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Balance of legal
capital reserve
(Millions of yen)
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January 1, 2018
to March 31,
2018
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Common stock
288,500
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Common stock
238,785,310
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359
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92,728
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359
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82,793
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Note:
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1.
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Amounts less than one million yen are rounded down.
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2.
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Increase in total number of shares issued as a result of the
exercise of stock options.
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3.
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Total number of shares issued increased by 1,172,332 shares, and
share capital and legal capital reserve each increased by 2,499
million yen due to third-party allotment of new shares on April 25,
2018.
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4.
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Total number of shares issued increased by 63,000 shares, and share
capital and legal capital reserve each increased by 93 million yen
upon exercise of the stock options during the period from April 1,
2018 to April 30, 2018.
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(6) Principal shareholders
The principal shareholders are not presented on account of the current
quarterly accounting period being the first quarter period.
(7) Voting rights
a. Shares issued
(As of March 31, 2018)
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Classification
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Number of shares
(Shares)
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Number of voting
rights
(Units)
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Details
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Shares without voting rights
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—
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—
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—
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Shares with restricted voting rights (treasury stock, etc.)
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—
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—
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—
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Shares with restricted voting rights (others)
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—
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—
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—
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Shares with full voting rights (treasury stock, etc.)
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—
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—
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—
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Shares with full voting rights (others)
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Common stock
238,768,800
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2,387,688
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—
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Shares constituting less than one unit
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Common stock
16,510
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—
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—
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Total number of shares issued
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|
Common stock
238,785,310
|
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—
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|
—
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Total number of voting rights held by all shareholders
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—
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2,387,688
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—
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Notes:
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1.
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Common stock in “Shares with full voting rights (others)” includes
1,007,700 stocks held by the Trust for Employee Stock Ownership Plan
(J-ESOP).
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2.
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“Shares constituting less than one unit” includes 10 stocks of the
Group, which is held by the Trust for the Employee Stock Ownership
Plan (J-ESOP).
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b. Treasury stock, etc.
In connection with the Company’s implementation of an Employee Stock
Ownership Plan (J-ESOP), Trust & Custody Services Bank, Ltd. (Trust E)
holds 1,007,710 shares of the Company’s stock as trust property. Said
shares are recorded as treasury stock in the interim condensed
consolidated financial statements as per accounting policies. However,
these shares hold voting rights and do not qualify as treasury stock as
set forth in the Companies Act. As such, in the above “a. Shares
issued,” they are included in “Shares with full voting rights (others)”
and are not included in “Shares with restricted voting rights (treasury
stock, etc.)” or “Shares with full voting rights (treasury stock,
etc.).” Therefore, there is nothing to disclose in this section.
2. Directors and executive officers
Not applicable.
IV. Accounting
Preparation of interim condensed consolidated financial statements
The interim condensed consolidated financial statements of the Group are
prepared in conformity with International Accounting Standard 34,
“Interim Financial Reporting” pursuant to the provisions of Article 93
of the Ordinance on Terminology, Forms and Preparation Methods of
Quarterly Consolidated Financial Statements (Cabinet Office Ordinance
No. 64 of 2007; hereinafter referred to as the “Ordinance on QCFS”).
|
1 Interim condensed consolidated financial statements
|
(1) Interim Condensed Consolidated Statement of Financial Position
- Unaudited
|
|
(In millions of yen)
|
|
|
Notes
|
|
December 31,
2017
|
|
March 31,
2018
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
123,606
|
|
107,266
|
Trade and other receivables
|
|
7,9
|
|
42,892
|
|
38,633
|
Other financial assets, current
|
|
7
|
|
13,258
|
|
17,471
|
Contract assets
|
|
9
|
|
-
|
|
307
|
Inventories
|
|
|
|
3,455
|
|
2,874
|
Other current assets
|
|
|
|
7,438
|
|
8,213
|
Total current assets
|
|
|
|
190,649
|
|
174,764
|
Non-current assets
|
|
|
|
|
|
|
Property and equipment
|
|
5
|
|
15,125
|
|
18,025
|
Goodwill
|
|
15
|
|
16,767
|
|
16,890
|
Other intangible assets
|
|
15
|
|
6,486
|
|
6,179
|
Investments in associates and joint ventures
|
|
17
|
|
24,844
|
|
30,084
|
Other financial assets, non-current
|
|
7
|
|
32,084
|
|
34,703
|
Deferred tax assets
|
|
6
|
|
16,492
|
|
16,435
|
Other non-current assets
|
|
|
|
992
|
|
855
|
Total non-current assets
|
|
|
|
112,790
|
|
123,171
|
Total assets
|
|
|
|
303,439
|
|
297,935
|
Liabilities
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Trade and other payables
|
|
7
|
|
28,810
|
|
27,702
|
Other financial liabilities, current
|
|
7
|
|
28,003
|
|
31,933
|
Accrued expenses
|
|
|
|
12,087
|
|
11,089
|
Income tax payables
|
|
|
|
2,365
|
|
1,263
|
Contract liabilities
|
|
9
|
|
-
|
|
24,471
|
Advances received
|
|
|
|
17,975
|
|
-
|
Deferred revenue
|
|
|
|
9,246
|
|
-
|
Provisions, current
|
|
|
|
991
|
|
2,159
|
Other current liabilities
|
|
|
|
1,940
|
|
1,870
|
Total current liabilities
|
|
|
|
101,417
|
|
100,487
|
Non-current liabilities
|
|
|
|
|
|
|
Other financial liabilities, non-current
|
|
7
|
|
602
|
|
350
|
Deferred tax liabilities
|
|
6
|
|
1,573
|
|
1,799
|
Provisions, non-current
|
|
5
|
|
3,060
|
|
3,073
|
Post-employment benefits
|
|
|
|
6,162
|
|
6,211
|
Other non-current liabilities
|
|
|
|
648
|
|
850
|
Total non-current liabilities
|
|
|
|
12,045
|
|
12,283
|
Total liabilities
|
|
|
|
113,462
|
|
112,770
|
Shareholders’ equity
|
|
|
|
|
|
|
Share capital
|
|
8
|
|
92,369
|
|
92,729
|
Share premium
|
|
8
|
|
93,560
|
|
94,057
|
Treasury shares
|
|
8
|
|
(4,000)
|
|
(4,000)
|
Accumulated deficit
|
|
|
|
(4,294)
|
|
(5,500)
|
Accumulated other comprehensive income
|
|
|
|
7,440
|
|
3,809
|
Equity attributable to the shareholders of the Company
|
|
|
|
185,075
|
|
181,095
|
Non-controlling interests
|
|
15
|
|
4,902
|
|
4,070
|
Total shareholders’ equity
|
|
|
|
189,977
|
|
185,165
|
Total liabilities and shareholders’ equity
|
|
|
|
303,439
|
|
297,935
|
|
|
|
|
|
|
|
|
(2) Interim Condensed Consolidated Statement of Profit or Loss -
Unaudited
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
For the three-month period ended March 31,
|
|
|
Notes
|
|
2017
|
|
2018
|
Revenues and other operating income:
|
|
|
|
|
|
|
Revenues
|
|
9
|
|
38,916
|
|
|
48,736
|
|
Other operating income
|
|
9,17
|
|
330
|
|
|
1,473
|
|
Total revenues and other operating income
|
|
|
|
39,246
|
|
|
50,209
|
|
Operating expenses:
|
|
|
|
|
|
|
Payment processing and licensing expenses
|
|
|
|
(7,684
|
)
|
|
(7,306
|
)
|
Sales commission expenses
|
|
|
|
(138
|
)
|
|
(3,011
|
)
|
Employee compensation expenses
|
|
13
|
|
(9,718
|
)
|
|
(13,493
|
)
|
Marketing expenses
|
|
|
|
(4,026
|
)
|
|
(3,931
|
)
|
Infrastructure and communication expenses
|
|
|
|
(2,142
|
)
|
|
(2,601
|
)
|
Subcontract and other service expenses
|
|
|
|
(4,815
|
)
|
|
(7,937
|
)
|
Depreciation and amortization expenses
|
|
5
|
|
(1,476
|
)
|
|
(2,329
|
)
|
Other operating expenses
|
|
18
|
|
(5,222
|
)
|
|
(8,355
|
)
|
Total operating expenses
|
|
|
|
(35,221
|
)
|
|
(48,963
|
)
|
Profit from operating activities
|
|
|
|
4,025
|
|
|
1,246
|
|
Finance income
|
|
|
|
25
|
|
|
99
|
|
Finance costs
|
|
|
|
(6
|
)
|
|
(8
|
)
|
Share of loss of associates and joint ventures
|
|
17
|
|
(794
|
)
|
|
(1,804
|
)
|
Loss on foreign currency transactions, net
|
|
|
|
(362
|
)
|
|
(564
|
)
|
Other non-operating income
|
|
12
|
|
678
|
|
|
976
|
|
Other non-operating expenses
|
|
12
|
|
—
|
|
|
(83
|
)
|
Profit/(loss) before tax from continuing operations
|
|
|
|
3,566
|
|
|
(138
|
)
|
Income tax expenses
|
|
6
|
|
(1,931
|
)
|
|
(1,636
|
)
|
Profit/(loss) for the period from continuing operations
|
|
|
|
1,635
|
|
|
(1,774
|
)
|
(Loss)/profit from discontinued operations, net of tax
|
|
10
|
|
(3
|
)
|
|
4
|
|
Profit/(loss) for the period
|
|
|
|
1,632
|
|
|
(1,770
|
)
|
Attributable to:
|
|
|
|
|
|
|
The shareholders of the Company
|
|
11
|
|
1,437
|
|
|
(1,383
|
)
|
Non-controlling interests
|
|
|
|
195
|
|
|
(387
|
)
|
|
(In yen)
|
Earnings per share
|
|
|
|
|
|
|
Basic profit/(loss)for the period attributable to the shareholders
of the Company
|
|
11
|
|
6.58
|
|
|
(5.82
|
)
|
Diluted profit/(loss) for the period attributable to the
shareholders of the Company
|
|
11
|
|
6.07
|
|
|
(5.82
|
)
|
Earnings per share from continuing operations
|
|
|
|
|
|
|
Basic profit/(loss) from continuing operations attributable to the
shareholders of the Company
|
|
11
|
|
6.60
|
|
|
(5.84
|
)
|
Diluted profit/(loss) from continuing operations attributable to the
shareholders of the Company
|
|
11
|
|
6.08
|
|
|
(5.84
|
)
|
Earnings per share from discontinued operations
|
|
|
|
|
|
|
Basic (loss)/profit from discontinued operations attributable to the
shareholders of the Company
|
|
11
|
|
(0.02
|
)
|
|
0.02
|
|
Diluted (loss)/profit from discontinued operations attributable to
the shareholders of the Company
|
|
11
|
|
(0.01
|
)
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Interim Condensed Consolidated Statement of Comprehensive
Income - Unaudited
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
For the three-month period ended March 31,
|
|
|
Notes
|
|
2017
|
|
2018
|
Profit/(loss) for the period
|
|
|
|
1,632
|
|
|
(1,770
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Items that will not be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
Net changes in fair value of equity instruments at FVOCI
|
|
12
|
|
-
|
|
|
400
|
|
Income tax relating to items that will not be reclassified to profit
or loss
|
|
|
|
-
|
|
|
(74
|
)
|
Items that may be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
Net changes in fair value
|
|
12
|
|
1,241
|
|
|
-
|
|
Reclassification to profit or loss
|
|
|
|
(544
|
)
|
|
-
|
|
Debt instruments at FVOCI
|
|
|
|
|
|
|
|
|
Net changes in fair value
|
|
12
|
|
-
|
|
|
4
|
|
Exchange differences on translation of foreign operations:
|
|
|
|
|
|
|
|
|
Gain/(loss) arising during the period
|
|
|
|
698
|
|
|
(2,852
|
)
|
Reclassification to profit or loss
|
|
|
|
-
|
|
|
(107
|
)
|
Proportionate share of other comprehensive income of associates and
joint ventures
|
|
|
|
(10
|
)
|
|
11
|
|
Reclassification to profit or loss
|
|
|
|
-
|
|
|
(8
|
)
|
Income tax relating to items that may be reclassified subsequently
to profit or loss
|
|
|
|
(218
|
)
|
|
(35
|
)
|
Total other comprehensive income for the period, net of tax
|
|
|
|
1,167
|
|
|
(2,661
|
)
|
Total comprehensive income for the period, net of tax
|
|
|
|
2,799
|
|
|
(4,431
|
)
|
Attributable to:
|
|
|
|
|
|
|
|
|
The shareholders of the Company
|
|
|
|
2,604
|
|
|
(3,756
|
)
|
Non-controlling interests
|
|
|
|
195
|
|
|
(675
|
)
|
|
|
|
|
|
|
|
|
|
|
(4) Interim Condensed Consolidated Statement of Change in Equity -
Unaudited
|
(In millions of yen)
|
|
|
|
|
Equity attributable to the shareholders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
Notes
|
|
Share
capital
|
|
Share
premium
|
|
Treasury
shares
|
|
Accumulated
deficit
|
|
Foreign
currency
translation
reserve
|
|
Available-for-
sale reserve
|
|
Defined
benefit plan
reserve
|
|
Total
|
|
Non-
controlling
interests
|
|
Total
shareholders’
equity
|
Balance at January 1, 2017
|
|
|
|
77,856
|
|
91,208
|
|
-
|
|
(12,381 )
|
|
(174)
|
|
5,649
|
|
(1,324 )
|
|
160,834
|
|
189
|
|
161,023
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
|
|
-
|
|
-
|
|
-
|
|
1, 437
|
|
-
|
|
-
|
|
-
|
|
1,437
|
|
195
|
|
1,632
|
Other comprehensive income
|
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
699
|
|
468
|
|
-
|
|
1,167
|
|
0
|
|
1,167
|
Total comprehensive income for the period
|
|
|
|
-
|
|
-
|
|
-
|
|
1,437
|
|
699
|
|
468
|
|
-
|
|
2,604
|
|
195
|
|
2,799
|
Recognition of share-based payments
|
|
8,13
|
|
-
|
|
748
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
748
|
|
-
|
|
748
|
Forfeiture of stock options
|
|
8,13
|
|
-
|
|
(8 )
|
|
-
|
|
8
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Exercise of stock options
|
|
8,13
|
|
1,497
|
|
(461)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,036
|
|
-
|
|
1,036
|
Acquisition of non-controlling interests
|
|
8
|
|
-
|
|
(46 )
|
|
-
|
|
-
|
|
2
|
|
-
|
|
-
|
|
(44 )
|
|
15
|
|
(29)
|
Balance at March 31, 2017
|
|
|
|
79,353
|
|
91,441
|
|
-
|
|
(10,936 )
|
|
527
|
|
6,117
|
|
(1,324 )
|
|
165,178
|
|
399
|
|
165,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
Equity attributable to the shareholders of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
Notes
|
|
Share
capital
|
|
Share
premium
|
|
Treasury
shares
|
|
Accumulated
deficit
|
|
Foreign
currency
translation
reserve
|
|
Financial assets at FVOCI
|
|
Defined
benefit plan
reserve
|
|
Total
|
|
Non-
controlling
interests
|
|
Total
shareholders’
equity
|
Balance at January 1, 2018
|
|
|
|
92,369
|
|
93,560
|
|
(4,000 )
|
|
(4,294 )
|
|
3,158
|
|
3,928
|
|
354
|
|
185,075
|
|
4,902
|
|
189,977
|
Adjustment on adoption of new accounting standards
|
|
|
|
-
|
|
-
|
|
-
|
|
177
|
|
-
|
|
(1,258)
|
|
-
|
|
(1,081)
|
|
(85)
|
|
(1,166)
|
Balance at January 1, 2018 (restated)
|
|
|
|
92,369
|
|
93,560
|
|
(4,000 )
|
|
(4,117 )
|
|
3,158
|
|
2,670
|
|
354
|
|
183,994
|
|
4,817
|
|
188,811
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period
|
|
|
|
-
|
|
-
|
|
-
|
|
(1,383)
|
|
-
|
|
-
|
|
-
|
|
(1,383)
|
|
(387)
|
|
(1,770)
|
Other comprehensive income
|
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(2,714)
|
|
341
|
|
-
|
|
(2,373)
|
|
(288)
|
|
(2,661)
|
Total comprehensive income for the period
|
|
|
|
-
|
|
-
|
|
-
|
|
(1,383)
|
|
(2,714)
|
|
341
|
|
-
|
|
(3,756)
|
|
(675)
|
|
(4,431)
|
Recognition of share-based payments
|
|
8,13
|
|
-
|
|
586
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
586
|
|
-
|
|
586
|
Exercise of stock options
|
|
8,13
|
|
360
|
|
(89)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
271
|
|
-
|
|
271
|
Acquisition of non-controlling interests
|
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(72)
|
|
(72)
|
Balance at March 31, 2018
|
|
|
|
92,729
|
|
94,057
|
|
(4,000 )
|
|
(5,500 )
|
|
444
|
|
3,011
|
|
354
|
|
181,095
|
|
4,070
|
|
185,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) Interim Condensed Consolidated Statement of Cash Flows -
Unaudited
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
For the three-month period ended March 31,
|
|
|
Notes
|
|
2017
|
|
2018
|
Cash flows from operating activities
|
|
|
|
|
|
|
Profit/(loss) before tax from continuing operations
|
|
|
|
3,566
|
|
|
(138
|
)
|
(Loss)/profit before tax from discontinued operations
|
|
10
|
|
(5
|
)
|
|
6
|
|
Profit/(loss) before tax
|
|
|
|
3,561
|
|
|
(132
|
)
|
Adjustments for:
|
|
|
|
|
|
|
Depreciation and amortization expenses
|
|
5
|
|
1,476
|
|
|
2,329
|
|
Finance income
|
|
|
|
(25
|
)
|
|
(99
|
)
|
Finance costs
|
|
|
|
6
|
|
|
8
|
|
Share-based compensation expenses
|
|
13
|
|
748
|
|
|
933
|
|
Gain on financial assets at fair value through profit or loss
|
|
12
|
|
(99
|
)
|
|
(903
|
)
|
Gain on sales of available-for-sale financial assets
|
|
7
|
|
(544
|
)
|
|
-
|
|
Impairment loss of financial assets
|
|
|
|
-
|
|
|
10
|
|
Share of loss of associates and joint ventures
|
|
|
|
794
|
|
|
1,804
|
|
Dilution gains from changes in equity interest in associates and
joint ventures
|
|
17
|
|
-
|
|
|
(1,237
|
)
|
(Gain)/loss on foreign currency transactions, net
|
|
|
|
(7
|
)
|
|
187
|
|
Changes in:
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
|
(3,748
|
)
|
|
3,013
|
|
Contract assets
|
|
9
|
|
-
|
|
|
130
|
|
Inventories
|
|
|
|
(428
|
)
|
|
473
|
|
Trade and other payables
|
|
|
|
382
|
|
|
(1,193
|
)
|
Contract liabilities
|
|
9
|
|
-
|
|
|
369
|
|
Accrued expenses
|
|
|
|
(1,343
|
)
|
|
(1,037
|
)
|
Deferred revenue
|
|
|
|
15
|
|
|
-
|
|
Advances received
|
|
|
|
807
|
|
|
-
|
|
Provisions
|
|
|
|
(237
|
)
|
|
616
|
|
Post-employment benefits
|
|
|
|
544
|
|
|
195
|
|
Other current assets
|
|
|
|
(630
|
)
|
|
113
|
|
Other current liabilities
|
|
|
|
(323
|
)
|
|
(901
|
)
|
Others
|
|
|
|
(451
|
)
|
|
(395
|
)
|
Cash provided by operating activities
|
|
|
|
498
|
|
|
4,283
|
|
Interest received
|
|
|
|
28
|
|
|
149
|
|
Interest paid
|
|
|
|
(6
|
)
|
|
(4
|
)
|
Income taxes paid
|
|
|
|
(5,551
|
)
|
|
(1,943
|
)
|
Net cash (used in)/provided by operating activities
|
|
|
|
(5,031
|
)
|
|
2,485
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Purchase of time deposits
|
|
|
|
(199
|
)
|
|
(2,942
|
)
|
Proceeds from time deposits.
|
|
|
|
-
|
|
|
1,080
|
|
Purchase of equity investments
|
|
12
|
|
(1,309
|
)
|
|
(1,858
|
)
|
Proceeds from sales of equity investments
|
|
|
|
1,199
|
|
|
-
|
|
Investments in debt instruments
|
|
|
|
-
|
|
|
(2,402
|
)
|
Proceeds from redemption of debt instruments
|
|
|
|
1,009
|
|
|
85
|
|
Acquisition of property and equipment and intangible assets
|
|
|
|
(2,299
|
)
|
|
(4,668
|
)
|
Proceeds from sales of property and equipment and intangible assets
|
|
|
|
-
|
|
|
59
|
|
Investments in associates and joint ventures
|
|
|
|
(529
|
)
|
|
(7,573
|
)
|
Return of capital from investments in associates
|
|
|
|
-
|
|
|
499
|
|
Payments of office security deposits
|
|
|
|
(21
|
)
|
|
(204
|
)
|
Refund of office securities deposits
|
|
|
|
27
|
|
|
14
|
|
Payment of loan receivables
|
|
|
|
(2
|
)
|
|
(342
|
)
|
Collection for loan receivables
|
|
|
|
-
|
|
|
153
|
|
Acquisition of subsidiaries and businesses, net of cash acquired
|
|
|
|
-
|
|
|
64
|
|
Others
|
|
|
|
69
|
|
|
(20
|
)
|
Net cash used in investing activities
|
|
|
|
(2,055
|
)
|
|
(18,055
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
Repayment of short-term borrowings
|
|
|
|
(1,057
|
)
|
|
(66
|
)
|
Repayment of long-term borrowings
|
|
|
|
-
|
|
|
(1
|
)
|
Payment of common shares issuance costs
|
|
|
|
(10
|
)
|
|
(2
|
)
|
Proceeds from exercise of stock options
|
|
|
|
1,042
|
|
|
272
|
|
Payment for acquisition of interest in a subsidiary from
non-controlling interests
|
|
|
|
(29
|
)
|
|
-
|
|
Others
|
|
|
|
1
|
|
|
1
|
|
Net cash (used in)/provided by financing activities
|
|
|
|
(53
|
)
|
|
204
|
|
Net decrease in cash and cash equivalents
|
|
|
|
(7,139
|
)
|
|
(15,366
|
)
|
Cash and cash equivalents at the beginning of the year
|
|
|
|
134,698
|
|
|
123,606
|
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
|
32
|
|
|
(974
|
)
|
Cash and cash equivalents at the end of the interim reporting
period
|
|
|
|
127,591
|
|
|
107,266
|
|
|
|
|
|
|
|
|
|
|
Notes to Interim Condensed Consolidated Financial Statements –
Unaudited
1.
Reporting Entity
LINE Corporation (the “Company”) was incorporated in September 2000 in
Japan in accordance with the Companies Act of Japan under the name
Hangame Japan Corporation to provide online gaming services. The Company
changed its name to NHN Japan Corporation in August 2003, and
subsequently changed its name to LINE Corporation in April 2013. The
Company is a subsidiary of NAVER Corporation (“NAVER”), formerly NHN
Corporation, which is domiciled in Korea. NAVER is the Company and its
subsidiaries’ (collectively, the “Group”) ultimate parent company. The
Company’s head office is located at 4-1-6 Shinjuku, Shinjuku-ku, Tokyo,
Japan.
The Company listed shares of its common shares in the form of American
depositary shares on the New York Stock Exchange and shares of its
common shares on the Tokyo Stock Exchange.
The Group operates core business and strategic business. Core business
mainly consists of advertising services, communication and content
sales. Strategic business includes Fintech business such as LINE Pay
service, AI business and commerce business such as Friends service.
Refer to Note 4. Segment Information for further details.
2.
Basis of Preparation
The unaudited interim condensed consolidated financial statements have
been prepared in accordance with IAS 34 Interim Financial Reporting.
The unaudited interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
consolidated financial statements and should be read in conjunction with
the Group’s annual consolidated financial statements as of December 31,
2017.
The unaudited interim condensed consolidated financial statements were
approved by Representative Director, President and Chief Executive
Officer Takeshi Idezawa and Director and Chief Financial Officer In Joon
Hwang on May 10, 2018.
The Group meets the criteria of a “specified company” defined under
Article 1-2 of the Ordinance on QCFS.
The preparation of the unaudited interim condensed consolidated
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent amounts at the date of the unaudited
interim condensed consolidated financial statements as well as reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The significant estimates and
assumptions are reviewed by management on a regular basis. The effects
of a change in estimates and assumptions are recognized in the period of
the change or in the period of the change and future periods.
Intercompany balances and transactions have been eliminated upon
consolidation.
3.
Significant Accounting Policies
The accounting policies adopted in the preparation of the unaudited
interim condensed consolidated financial statements are consistent with
those followed in the preparation of the Group’s annual consolidated
financial statements for the year ended December 31, 2017, except for
the adoption of new standards effective as of January 1, 2018.
The adoption of new and revised IFRS issued by the International
Accounting Standards Board that are mandatorily effective for an
accounting period that begins on or after January 1, 2018 had no impact
on the Group’s unaudited interim condensed consolidated financial
statements as of and for the three-month periods ended March 31, 2017
and 2018 and annual consolidated financial statements as of December 31,
2017, except for the following standards.
1. IFRS15 Revenue from Contracts with Customers
The IASB issued IFRS 15
Revenue from Contracts with Customers
for
recognizing revenue. IFRS 15 establishes a five-step model that will
apply to all revenue arising from contracts with customers, regardless
of the type of transaction or industry, with limited exceptions.
The Group recognizes revenue associated with communication and content
sales and with advertising services by reference to the stage of
completion. The Group has concluded that the current methods of revenue
recognition and measurement are in accordance with IFRS 15, with the
exception of the following services.
The Group has adopted IFRS 15 from the fiscal year 2018. The Group has
used the modified retrospective method which is to record cumulative
amount of the impact at the beginning balance of the retained earnings
upon adoption.
(1) LINE Stickers and Creator Stickers
The new standard resulted in a change to the timing of revenue
recognition, whereby revenue is recognized over an estimated usage
period on a straight-line method rather than the previous method, which
was over time but on an accelerated basis.
Under the previous standard, the Group determined that the measuring
method which best depicts the progress towards satisfaction of
performance based on a contract was the users’ usage pattern of Stickers
which represented the consumption of the user’s benefits, and recognized
revenue during the earlier part of the estimated usage period.
On the other hand, the concept of a service of standing ready is
clarified under IFRS 15. IFRS 15 clarified the service of standing ready
as to provide services or to make services available to the users for
their use as and when the users decide. The Group determines that LINE
Stickers and Creator Stickers services which the Group provides to its
users are similar to the concept of a service of standing ready. The
performance obligation of the Group to the customers which are the users
who purchased Stickers is to make the Stickers and Creator Stickers
available to the users for their use at any given time. Accordingly, the
users receive the benefit of the services and consume such services as
the Group makes LINE Stickers and Creator Stickers available to the
users for their use. Therefore, the Group determines that its
performance obligation is evenly satisfied over time and assessed that a
straight-line method over an estimated usage period is the best method
to measure the progress towards complete satisfaction of the performance
obligation. As a result, compared to the previous method, the amount of
revenue recognized by the Group increased by 15 million yen, and the
operating profit from operating activities increased by 35 million yen
for the three-month ended March 31, 2018.
(2) LINE Sponsored Stickers
The new standard resulted in a change to the timing of revenue
recognition, whereby revenue is recognized over a contract period on a
straight-line method rather than the previous method, which was over
time but on an accelerated basis.
Under the previous standard, the Group determined that the measuring
method which best depicts the progress towards satisfaction of
performance based on a contract was the users’ usage pattern of Sponsors
Stickers which represent its progress of rendering the services, and
recognized revenue based on the users usage pattern of Sponsors Stickers
which was weighted towards the earlier part of the period.
On the other hand, under IFRS 15, the definition of a “customer” is
clarified and it is defined as “a party that has contracted with an
entity to obtain goods or services that are an output of the entity’s
ordinary activities in exchange for consideration.” Also, the contract
with “customers” is within the scope of IFRS 15, and IFRS 15 requires to
measure the progress towards complete satisfaction of a performance
obligation to “customers.”
In the LINE Sponsored Stickers contract, only an advertiser is obligated
to pay consideration for Sponsored Stickers service to the Group, and
the users who use Sponsored Stickers do not pay any consideration to the
Group directly or indirectly. Therefore, the Group determines the
advertisers as “customers.” The performance obligation of the Group to
the advertisers is to make the Sponsored Stickers available to the users
for their use at any time over a contract period. Accordingly, the Group
has assessed that a straight-line method over a contract period is the
best method to measure the progress towards complete satisfaction of the
performance obligation. As a result, compared to the previous method,
the amount of revenue recognized by the Group increased by 125 million
yen, and the operating profit from operating activities increased by 114
million yen for the three-month ended March 31, 2018.
(3) LINE Point Ad
The new standard resulted in a change to the timing of revenue
recognition, whereby the Group is recognize revenue at the time when the
LINE Points are issued to the users rather than when the LINE Points are
utilized by the users.
Under the previous standard, the portion of the revenue of LINE Point Ad
service attributable to LINE Points was measured at the fair value of
LINE Points, and revenue related to unused LINE Points at the end of the
accounting period was deferred, while revenue related to redeemed LINE
Points was recognized in accordance with the revenue recognition policy
for the virtual item purchased.
On the other hand, the definition of a “customer” is clarified under
IFRS 15 as mentioned above. Upon the adoption of the IFRS 15, the Group
determines the advertisers as customers for LINE Point Ad services
because only the advertisers pay the transaction prices consideration to
the Group for the advertising services the Group provides and the users
who receive LINE Points, do not pay any transaction prices directly or
indirectly. The Group considers its performance obligation in the
contract with a customer who is an advertiser, is to be satisfied when
the Group issues the LINE Points to the users because the Company does
not have any obligations toward the advertisers to manage LINE Points or
to provide users other services in exchange for the LINE points,
thereafter for the advertisers. As a result, the Group has assessed to
recognize revenue at the time when LINE Points are issued to the users.
Also, under IFRS 15, the Group recognizes provisions for the expenses
expected to be incurred in relation to the consumption of LINE points,
and such expenses are recognized at the same time as LINE Points are
issued to the users and as the Group satisfies its performance
obligations. As a result, compared to the previous method, the amount of
revenue recognized by the Group increased by 50 million yen, and the
operating profit from operating activities decreased by 9 million yen
for the three-month ended March 31, 2018.
(4) Advertising services
For advertising services such as official account, an advertising agency
may be involved to obtain contracts from customers and provide, on
behalf of the Company, services to customers such as formatting
advertisement publication to comply with the Group’s specification or
standards of advertisement publication. In such transaction, the new
standard will result in a change to the method of revenue recognition,
whereby the Group will recognize revenue by the gross recognition where
the Group recognizes consideration received from customers including the
share of advertising agencies rather than net recognition where the
Group recognizes consideration received from customers excluding the
share of advertising agency.
Under the previous standard, the Company recognized revenue by excluding
the share attributable to the advertising agency from the total
consideration received from the customer due to the facts that the share
of the advertising agency was identified as an individually identifiable
element, that the Company did not directly provide the service and
earned revenue at constant rate, and that the Company did not bear
credit risks.
On the other hand, IFRS 15 clarifies the evaluation of whether an entity
is a principal or an agent based on the identification of performance
obligations and transfer of control for the services. Especially, it is
stated that “an entity is a principal if it controls the specified good
or service before that good or service is transferred to a customer.”
Guidance and indicators for whether an entity controls the specified
goods or services to be provided by another parties to customers are
revised. This revision of the guidance and indicators includes a right
to a service to be performed by the other party which gives the entity
the ability to direct that party to provide the service to the customer
on the entity's behalf. Since the service provided by advertising
agencies such as formatting advertisement publication is provided to
customers based on the Group’s specification or standards of
advertisement publication, the Group determined that the Group controls
the service provided by the advertising agency and thus the Group is the
principal. As a result, the Company determined to change the recognition
method of revenue based on the total consideration received from a
customer, including the service provided by the advertising agent. As a
result, compared to the previous method, the amount of revenue
recognized by the Group increased by 2,086 million yen for the
three-month ended March 31, 2018.
Moreover, in accordance with IFRS 15, the Group recognizes costs of
contract which consist of consideration payable to the advertising
agency as an asset and will expense as the related revenues are
recognized. If the advertising contract is renewed at the end of the
original term, another consideration payable to the advertising agency
will be incurred, and such cost will be expensed during the period that
is the same period which the revenue of the advertising contract is
recognized for. Therefore, compared to the previous method, the sales
commission expenses increased by 2,086 million yen for the three-month
period ended March 31, 2018. However, as sales commission expenses
increased by the same amount as the revenues, there is no effect on the
profit from operating activities.
As a result, the opening balance of accumulated deficit is adjusted as
following.
|
|
(In millions of yen)
|
|
|
January 1,
2018
|
LINE Stickers and Creator Stickers
|
|
(967)
|
LINE Sponsored Stickers
|
|
(760)
|
LINE Point Ad
|
|
667
|
Other
|
|
(63)
|
Total
|
|
(1,123)
|
|
|
|
The adjustments made to line items presented on the financial statements
due to the change from IAS 18 Revenue and other standards applied
previously (collectively, the IAS 18 and other) to IFRS 15 are as
follows. Reclassifications are made to reflect the terms used under IFRS
15. Certain amounts previously presented in trade and other receivables
related to advertising services are reclassified into contract assets,
while certain amounts previously presented in advances received arising
from LINE Points and in deferred revenue associated with LINE stickers
or advertising services are reclassified into other financial
liabilities, current and contract liabilities.
(In millions of yen)
|
|
|
January 1, 2018
(under IAS 18 and other)
|
|
Reclassification
|
|
Remeasurement
|
|
January 1, 2018
(under IFRS 15)
|
Trade and other receivables
|
|
42,892
|
|
(437)
|
|
(792)
|
|
41,663
|
Contract assets
|
|
-
|
|
437
|
|
-
|
|
437
|
Other current assets
|
|
7,438
|
|
-
|
|
1,052
|
|
8,490
|
Deferred tax assets
|
|
16,492
|
|
-
|
|
384
|
|
16,876
|
Other financial liabilities, current
|
|
28,003
|
|
4,633
|
|
-
|
|
32,636
|
Contract liabilities
|
|
-
|
|
22,588
|
|
1,391
|
|
23,979
|
Advances received
|
|
17,975
|
|
(17,975)
|
|
-
|
|
-
|
Deferred revenue
|
|
9,246
|
|
(9,246)
|
|
-
|
|
-
|
Provision, current
|
|
991
|
|
-
|
|
472
|
|
1,463
|
Accumulated deficit
|
|
(4,294)
|
|
-
|
|
(1,123)
|
|
(5,417)
|
Accumulated other comprehensive income
|
|
7,440
|
|
-
|
|
(8)
|
|
7,432
|
Non-controlling interests
|
|
4,902
|
|
-
|
|
(89)
|
|
4,813
|
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
March 31, 2018
(under IAS 18 and other)
|
|
Reclassification
|
|
Remeasurement
|
|
March 31, 2018
(under IFRS 15)
|
Trade and other receivables
|
|
39,913
|
|
(307)
|
|
(973)
|
|
38,633
|
Contract assets
|
|
-
|
|
307
|
|
-
|
|
307
|
Other current assets
|
|
7,048
|
|
-
|
|
1,165
|
|
8,213
|
Deferred tax assets
|
|
16,055
|
|
-
|
|
380
|
|
16,435
|
Other financial liabilities, current
|
|
28,649
|
|
3,284
|
|
-
|
|
31,933
|
Contract liabilities
|
|
-
|
|
23,374
|
|
1,097
|
|
24,471
|
Advances received
|
|
17,286
|
|
(17,286)
|
|
-
|
|
-
|
Deferred revenue
|
|
9,372
|
|
(9,372)
|
|
-
|
|
-
|
Provision, current
|
|
1,637
|
|
-
|
|
522
|
|
2,159
|
Accumulated deficit
|
|
(4,444)
|
|
-
|
|
(1,056)
|
|
(5,500)
|
Accumulated other comprehensive income
|
|
3,807
|
|
-
|
|
2
|
|
3,809
|
Non-controlling interests
|
|
4,061
|
|
-
|
|
9
|
|
4,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three-month periods ended March 31
|
(In millions of yen)
|
|
|
2018
(under IAS 18 and other)
|
|
Reclassification
|
|
Remeasurement
|
|
2018
(under IFRS 15)
|
Revenue and other operating income
|
|
|
|
|
|
|
|
|
Revenues
|
|
46,460
|
|
-
|
|
2,276
|
|
48,736
|
Other operating income
|
|
1,473
|
|
-
|
|
-
|
|
1,473
|
Revenue and other operating income total
|
|
47,933
|
|
-
|
|
2,276
|
|
50,209
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Payment processing and licensing expenses
|
|
(7,316)
|
|
-
|
|
10
|
|
(7,306)
|
Sales commission expenses
|
|
(914)
|
|
-
|
|
(2,097)
|
|
(3,011)
|
Employee compensation expenses
|
|
(13,493)
|
|
-
|
|
-
|
|
(13,493)
|
Marketing expenses
|
|
(3,931)
|
|
-
|
|
-
|
|
(3,931)
|
Infrastructure and communication expenses
|
|
(2,601)
|
|
-
|
|
-
|
|
(2,601)
|
Subcontract and other service expenses
|
|
(7,937)
|
|
-
|
|
-
|
|
(7,937)
|
Depreciation and amortization expenses
|
|
(2,329)
|
|
-
|
|
-
|
|
(2,329)
|
Other operating expenses
|
|
(8,305)
|
|
-
|
|
(50)
|
|
(8,355)
|
|
|
|
|
|
|
|
|
|
Operating expenses total
|
|
(46,826)
|
|
-
|
|
(2,137)
|
|
(48,963)
|
|
|
|
|
|
|
|
|
|
Profit from operating activities
|
|
1,107
|
|
-
|
|
139
|
|
1,246
|
|
|
|
|
|
|
|
|
|
Loss before tax from continuing operations
|
|
(277)
|
|
-
|
|
139
|
|
(138)
|
Income tax expenses
|
|
(1,603)
|
|
-
|
|
(33)
|
|
(1,636)
|
Loss for the period from continuing operations
|
|
(1,880)
|
|
-
|
|
106
|
|
(1,774)
|
|
|
|
|
|
|
|
|
|
Loss for the period
|
|
(1,876)
|
|
-
|
|
106
|
|
(1,770)
|
Attributable to:
|
|
|
|
|
|
|
|
|
The shareholders of the Company
|
|
(1,480)
|
|
-
|
|
97
|
|
(1,383)
|
Non-controlling interests
|
|
(396)
|
|
-
|
|
9
|
|
(387)
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
(In yen)
|
Basic loss for the period attributable to the shareholders of the
Company
|
|
(6.22)
|
|
-
|
|
0.40
|
|
(5.82)
|
Diluted loss for the period attributable to the shareholders of the
Company
|
|
(6.22)
|
|
-
|
|
0.40
|
|
(5.82)
|
Earnings per share from continuing operations
|
|
|
|
|
|
|
|
|
Basic loss from continuing operations attributable to the
shareholders of the Company
|
|
(6.24)
|
|
-
|
|
0.40
|
|
(5.84)
|
Diluted loss from continuing operations attributable to the
shareholders of the Company
|
|
(6.24)
|
|
-
|
|
0.40
|
|
(5.84)
|
Under the previous standard, the Group recognized considerations
received from advertisers as advertising revenue after subtracting the
share of advertising agencies. However, under IFRS 15, the Group
recognizes such revenue by the gross recognition where the Group
recognizes considerations received from advertisers including the
portion for the services provided by the advertising agencies. As a
result, the amount of expenses which were to be paid to the advertising
agencies increased and became material. Therefore, the “sales commission
expenses” which were included in the “authentication and other service
expenses” are presented separately in the Interim Condensed Consolidated
Financial Statement of Profit or Loss from the three-month period ended
March 31, 2018, and the remaining “authentication and other service
expenses” is now presented as “subcontract and other service expenses”
as the materiality of authentication expenses decreased. The change was
applied to the Interim Condensed Consolidated Financial Statement of
Profit or Loss for the three-month period ended March 31, 2017.
2. IFRS 9 Financial Instruments
The IASB issued the final version of IFRS 9 Financial Instruments which
sets out the requirements for recognizing and measuring financial
assets, financial liabilities and some contracts to buy or sell
non-financial items to replace IAS 39 Financial Instruments: Recognition
and Measurement. IFRS 9 is the new standard for the financial reporting
of financial instruments that is principles-based and brings together
the classification and measurement, impairment and hedge accounting
phases of the IASB's project. IFRS 9 is built on a single classification
and measurement approach for financial assets that reflects the business
model in which they are managed and their cash flow characteristics
including new impairment requirements that are based on a more
forward-looking expected credit loss model that will result in more
timely recognition of loan losses and is a single model that is
applicable to all financial instruments subject to impairment
accounting. The Group has applied the following accounting policies in
accordance with IFRS 9 commencing on January 1, 2018.
(1) Classification of financial assets
Based on the Group’s business model for managing the financial assets
and the characteristics of contractual cash flow of the financial
assets, the Group classifies the financial assets by following
categories. Gains and losses arising from assets measured at fair value
are either recorded in profit or loss or other comprehensive income,
depending on the Group’s intention. Financial assets with embedded
derivatives are considered in their entirety when determining whether
their cash flows are solely payment of principal and interest.
i. Financial assets as amortized cost
Financial assets measured at amortized cost are debt instruments held
for collection of contractual cash flows and those cash flows represent
solely payments of principal and interest.
ii. Financial assets at fair value through other comprehensive income
Financial assets measured at fair value through other comprehensive
income are debt instruments whose contractual cash flows represent
solely payments of principal and interest on the principal amount
outstanding and which are held within a business model both to collect
contractual cash flows and sell and equity instruments which the Group
has made an irrevocable election at the time of initial recognition to
account for the equity investment at fair value through other
comprehensive income.
iii. Financial assets at fair value through profit or loss
Financial assets measured at fair value through profit or loss are the
financial assets that are not classified as financial asset at amortized
cost or financial assets at fair value through other comprehensive
income.
(2) Measurement of financial assets
Initial measurement
At initial recognition, the Group measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial
assets carried at fair value through profit or loss are expensed in
profit or loss.
Subsequent measurement
Debt instruments:
i. Amortized cost
Financial assets at amortized cost are measured at amortized cost using
the effective interest method, and related interest income is included
in finance income. When the asset is derecognized or impaired, a gain or
loss on a debt investment is recognized in profit or loss.
ii. Fair value through other comprehensive income (FVOCI)
Subsequent to initial recognition, financial assets are measured at fair
value and gains or losses arising from changes in the fair value are
recorded in other comprehensive income, except for the recognition of
interest revenue, foreign exchange gains or losses and expected credit
losses which are recognized in profit or loss. When debt investments are
derecognized, the cumulative gain or loss previously recognized in other
comprehensive income is reclassified from equity to profit or loss.
iii. Fair value through profit or loss
Subsequent to initial recognition, financial assets are measured at fair
value. A gain or loss on debt instruments which is not part of a hedging
relationship is recognized in profit or loss.
Equity instruments:
Where the Group has irrevocably elected to designate equity instruments
as financial assets measured at fair value through other comprehensive
income, movements in the carrying amount by fair value measurement are
recognized as other comprehensive income. There is no subsequent
reclassification of cumulative gains or losses previously recognized in
other comprehensive income to profit or loss. Where the Group has not
elected to designate equity instruments as financial assets measured at
fair value through other comprehensive income, movements in the carrying
amount by fair value measurement are recognized in profit or loss.
Dividends from equity investments are recognized in profit or loss as
“Other operating income” when the Group’s right to receive payments is
established.
(3) Impairment of financial assets
The Group assesses the expected credit losses associated with its assets
carried at amortized cost and FVOCI. The impairment methodology applied
depends on whether there has been a significant increase in credit risk.
For trade receivables only, the Group applies the simplified approach
permitted by IFRS9, which requires expected lifetime losses to be
recognized from initial recognition of the receivables.
The Group has applied IFRS 9 retrospectively and has determined not to
restate the comparative information for the period beginning January 1,
2017. As a result, the comparative information is prepared based on the
Group’s pervious accounting policies. On January 1, 2018, the Group has
assessed which business models to apply to its financial assets and
liabilities and classified such financial assets and liabilities in to
appropriate classification under IFRS 9. The impacts of these
classifications are as follows.
(In millions of yen)
|
|
|
|
|
|
|
Balance as of January 1, 2018 under IFRS 9
|
|
Impacts by adoption of IFRS 9
|
|
|
Notes
|
|
Balance at
January 1,
2018 under
IAS 39
|
|
Financial
assets/liabilities
at fair value
through profit
or loss
|
|
Financial
assets/liabilities
at FVOCI
|
|
Financial
assets/liabilities
at amortized
cost
|
|
Total financial
assets/liabilities
|
|
Fair value
measurement
at January 1,
2018
|
|
Provision at
January 1,
2018
|
|
Total impacts
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables
|
|
3
|
|
42,892
|
|
―
|
|
―
|
|
42,892
|
|
42,892
|
|
―
|
|
―
|
|
―
|
Total
|
|
|
|
42,892
|
|
―
|
|
―
|
|
42,892
|
|
42,892
|
|
―
|
|
―
|
|
―
|
Other financial assets, current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
3
|
|
12,002
|
|
―
|
|
―
|
|
12,002
|
|
12,002
|
|
―
|
|
―
|
|
―
|
Short-term loans
|
|
3
|
|
206
|
|
―
|
|
―
|
|
206
|
|
206
|
|
―
|
|
―
|
|
―
|
Corporate bonds and other debt instruments
|
|
4
|
|
849
|
|
―
|
|
852
|
|
―
|
|
852
|
|
6
|
|
(3)
|
|
3
|
Available-for-sale financial assets
|
|
|
|
6
|
|
―
|
|
6
|
|
―
|
|
6
|
|
―
|
|
―
|
|
―
|
Office security deposits
|
|
|
|
195
|
|
―
|
|
―
|
|
195
|
|
195
|
|
―
|
|
―
|
|
―
|
Total
|
|
|
|
13,258
|
|
―
|
|
858
|
|
12,403
|
|
13,261
|
|
6
|
|
(3)
|
|
3
|
Other financial assets, non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity investments
|
|
6
|
|
280
|
|
―
|
|
―
|
|
280
|
|
280
|
|
―
|
|
―
|
|
―
|
Loans and receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and other debt instruments
|
|
4, 5
|
|
7,986
|
|
28
|
|
7,997
|
|
―
|
|
8,025
|
|
52
|
|
(13)
|
|
39
|
Guarantee deposits
|
|
3
|
|
726
|
|
―
|
|
―
|
|
726
|
|
726
|
|
―
|
|
―
|
|
―
|
Office security deposits
|
|
3
|
|
5,709
|
|
―
|
|
―
|
|
5,709
|
|
5,709
|
|
―
|
|
―
|
|
―
|
Financial assets at fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion right and redemption right of preferred stock
|
|
|
|
1,862
|
|
1,862
|
|
―
|
|
―
|
|
1,862
|
|
―
|
|
―
|
|
―
|
Available-for-sale financial assets
|
|
1, 2
|
|
15,388
|
|
5,262
|
|
10,126
|
|
―
|
|
15,388
|
|
―
|
|
―
|
|
―
|
Other
|
|
|
|
133
|
|
―
|
|
44
|
|
89
|
|
133
|
|
―
|
|
―
|
|
―
|
Total
|
|
|
|
32,084
|
|
7,152
|
|
18,167
|
|
6,804
|
|
32,123
|
|
52
|
|
(13)
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
|
|
Balance as of January 1, 2018 under IFRS 9
|
|
Impacts by adoption of IFRS 9
|
|
|
Notes
|
|
Balance at
January 1,
2018 under
IAS 39
|
|
Financial
assets/liabilities
at fair value
through profit
or loss
|
|
Financial
assets/liabilities
at FVOCI
|
|
Financial
assets/liabilities
at amortized
cost
|
|
Total financial
assets/liabilities
|
|
Fair value
measurement
at January 1,
2018
|
|
Provision at
January 1, 2018
|
|
Total impacts
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at amortized cost
|
|
3
|
|
28,810
|
|
―
|
|
―
|
|
28,810
|
|
28,810
|
|
―
|
|
―
|
|
―
|
Total
|
|
|
|
28,810
|
|
―
|
|
―
|
|
28,810
|
|
28,810
|
|
―
|
|
―
|
|
―
|
Other financial liabilities, current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits received
|
|
|
|
5,730
|
|
―
|
|
―
|
|
5,730
|
|
5,730
|
|
―
|
|
―
|
|
―
|
Short-term borrowings
|
|
|
|
22,224
|
|
―
|
|
―
|
|
22,224
|
|
22,224
|
|
―
|
|
―
|
|
―
|
Others
|
|
|
|
49
|
|
―
|
|
―
|
|
49
|
|
49
|
|
―
|
|
―
|
|
―
|
Total
|
|
|
|
28,003
|
|
―
|
|
―
|
|
28,003
|
|
28,003
|
|
―
|
|
―
|
|
―
|
Other financial liabilities non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office security deposits received under sublease agreement
|
|
|
|
23
|
|
―
|
|
―
|
|
23
|
|
23
|
|
―
|
|
―
|
|
―
|
Others
|
|
|
|
93
|
|
―
|
|
―
|
|
93
|
|
93
|
|
―
|
|
―
|
|
―
|
Financial liabilities at fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put option liabilities
|
|
|
|
486
|
|
486
|
|
―
|
|
―
|
|
486
|
|
―
|
|
―
|
|
―
|
Total
|
|
|
|
602
|
|
486
|
|
―
|
|
116
|
|
602
|
|
―
|
|
―
|
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following are the impacts on accumulated deficit and accumulated other
comprehensive income by classification and measurement of financial
assets at January 1, 2018.
(In millions of yen)
|
|
|
Notes
|
|
Accumulated
deficit
|
|
Accumulated other
comprehensive
income -
Financial
assets at FVOCI
|
Balance of accumulated deficit and accumulated OCI as of January 1,
2018 under IAS 39
|
|
|
|
(4,294)
|
|
3,928
|
|
|
|
|
|
|
|
Reclassification from available-for-sale financial assets to
financial assets at fair value through profit or loss
|
|
1
|
|
316
|
|
(316)
|
Transfer of impairment losses arising from reclassification of
available-for-sale financial assets to financial assets at FVOCI and
recognized previously in profit or loss
|
|
2
|
|
1,000
|
|
(1,000)
|
Fair value measurement of financial assets classified from loans and
receivables to financial assets at FVOCI as of January 1, 2018
|
|
4
|
|
―
|
|
42
|
Increase in provision for debt instruments at FVOCI
|
|
4
|
|
(16)
|
|
16
|
Adjustment to shareholders’ equity from adoption of IFRS 9
|
|
|
|
1,300
|
|
(1,258)
|
Balance of accumulated deficit and accumulated OCI as of January 1,
2018 under IFRS 9
|
|
|
|
(2,994)
|
|
2,670
|
|
|
|
|
|
|
|
(1) Reclassification from available-for-sale financial assets to
financial assets at fair value through profit or loss
The investments in private equity investment funds of 2,966 million yen
and redeemable preferred stocks of unlisted companies of 2,296 million
yen as of January 1, 2018, were reclassified from available-for-sale
financial assets to financial assets at fair value through profit or
loss as the cash flows from these investments did not represent solely
payments of principal and interest on the principal amount outstanding
and as the maturities of such investments were predetermined. Also,
cumulative loss and its tax effects through fair value measurements of
259 million yen were reclassified from accumulated other comprehensive
income to accumulated deficit.
(2) Reclassification from available-for-sale financial assets to
financial assets at FVOCI
The investments in listed equity securities and private equity and other
financial instruments of 9,728 million yen, investments in corporate
bonds of 402 million yen, and investments in partnerships of 2 million
yen as of January 1, 2018, were reclassified from available-for-sale
financial assets to financial assets at FVOCI as the cash flows from
these investments did not represent solely payments of principal and
interest on the principal amount outstanding and as the Group has
determined to measure such investments at FVOCI. Also, related
cumulative impairment loss and its tax effects of 1,000 million yen were
reclassified from accumulated deficit to accumulated other comprehensive
income. The Group estimates a loss allowance based on 12 months expected
credit losses on debt instruments which are measured at FVOCI as the
Group has judged that the risks for such investments are low.
(3) Reclassification from loans and receivables to financial assets at
measured at amortized cost
Time deposits of 12,002 million yen, loans of 206 million yen, guarantee
deposits of 726 million yen and office security deposits of 5,709
million yen as of January 1, 2018 were reclassified from loans and
receivables to financial assets at amortized cost as the cash flows from
these assets represent solely payments of principal and interest on the
principal amount outstanding and as the Group’s business model is
achieved by collecting contractual cash flows. The amounts of expected
credit losses arising from those financial assets as of January 1, 2018,
were deemed immaterial.
(4) Reclassification from loans and receivables to financial assets at
FVOCI
Corporate bonds of 8,807 million yen as of January 1, 2018 were
reclassified from loans and receivables to financial assets at FVOCI as
the cash flows from these assets represent solely payments of principal
and interest on the principal amount outstanding and as the Group’s
business model is achieved by both collecting contractual cash flows and
selling of these financial assets for profit. Fair value gains and
related tax effects of 42 million yen measured at January 1, 2018, were
adjusted to the accumulated other comprehensive income. Also, expected
credit losses of 16 million yen measured at January 1, 2018 were
recognized as a loss allowance provision and adjusted to accumulated
other comprehensive income. The Group estimates a loss allowance based
on 12 months expected credit losses on debt instruments which are
measured at FVOCI as the Group has judged that the risks for such
investments are low.
(5) Reclassification from loans and receivables to financial assets at
fair value through profit or loss
A convertible bond of 28 million yen as of January 1, 2018, was
reclassified from loans and receivables to financial assets at fair
value through profit or loss as the cash flow did not represent solely
payments of principal and interest on the principal amount outstanding
and as the maturity was predetermined. There was no effect to
accumulated deficit and accumulated other comprehensive income at
January 1, 2018, due to the reclassification.
(6) Reclassification from held-to-maturity financial assets to financial
assets at measured at amortized cost
Japanese government bonds of 280 million yen as of January 1, 2018, were
reclassified from loans and receivables to financial assets at amortized
cost as the cash flows from these financial assets represent solely
payments of principal and interest on the principal amount outstanding
and as the Group’s business model is achieved by collecting contractual
cash flows. The amounts of expected credit losses arising from those
financial assets as of January 1, 2018, were deemed immaterial.
The group does not early adopt standards, interpretations and amendments
which are issued but not yet effective.
4.
Segment Information
The Group identifies operating segments based on the internal report
regularly reviewed by the Group's Chief Operating Decision Maker to make
decisions about resources to be allocated to segments and assess
performance. An operating segment of the Group is a component for which
discrete financial information is available. The Chief Operating
Decision Maker has been identified as the Company's board of directors.
No operating segments have been aggregated to form the reportable
segments.
In 2018, the Group changed its operating segment from one component to
two components as the budget has been prepared based on the Core
business and Strategic business and as the Company’s board of directors
changed the unit of components to assess performance of the Group from a
single segment to two segments, Core business segment and Strategic
business segment.
Under the corporate strategy to allocate the resources generated from
the Core business to the Strategic business, the Company’s board of
directors individually assesses the business performance of Core
business based on the growth of revenue and profitability and of
Strategic business based on profitability as well as important
non-financial KPIs such as the expansion of user base.
(1) Description of Reportable Segments
The Group’s reportable segments are as follows:
|
|
|
|
Core business segment
|
|
Core business segment mainly consists of Advertising service,
communication and content. Advertising services mainly includes
display advertising, accounts advertising, and portal advertising.
Display advertising provides advertisements on services such as LINE
NEWS. Account advertising mainly include LINE Official Accounts and
Sponsored Stickers. Portal advertising mainly include advertisements
on the services such as livedoor blog and NAVER Matome.
Communication mainly includes LINE Stickers. Content mainly includes
LINE Games. Core business segment includes other services such as
LINE Part-time Job.
|
Strategic business segment
|
|
Strategic business segment consists of Fintech services such as LINE
Pay service, and other commerce such as AI and LINE Friends services.
|
|
|
|
(2) Profit or Loss for the Group’s operating segments
The Group’s operating profit for each segment is prepared mainly by the
same method as the preparation of consolidated financial statements,
except certain items such as other operating income and share-based
compensation expenses are included in corporate expenses and
adjustments. Also, IT development expenses and indirect expenses such as
department management fees are allocated based on the information such
as the hours of service provided, the number of server infrastructures
used to provide the service, or the percentage of revenues. As the
Company’s board of directors uses information after eliminating
intercompany transactions for their performance assessment, there is no
adjustments between segments.
From the fiscal year of 2018, the Group changed its operating segment
into Core business segment and Strategic business segment, as the
Company’s board of directors assesses performance based on these
components. From the fiscal year 2018, the Group monitors its profit and
loss by segment. The profit and loss of each segment in fiscal year 2017
was prepared mainly based on the same method as in fiscal year 2018
where practicable and restated accordingly.
For the three-month period ended March 31, 2017
|
(In millions of yen)
|
|
|
Reportable segments
|
|
|
|
|
|
|
Core business
|
|
Strategic business
|
|
Total
|
|
Corporate expenses
and adjustments
(1)
|
|
Consolidated
|
Revenue from external customers
(2)
|
|
35,690
|
|
3,215
|
|
38,905
|
|
11
|
|
38,916
|
Segment profit/(loss)
|
|
7,289
|
|
(2,676)
|
|
4,613
|
|
(588)
|
|
4,025
|
Depreciation and amortization expenses
|
|
1,327
|
|
149
|
|
1,476
|
|
-
|
|
1,476
|
|
(1)
|
|
Corporate expenses and adjustments mainly include differences
arising from separate exchange rates used in management
accounting, other operating income and share-based compensation
expenses.
|
|
(2)
|
|
Revenue from external customers for the three-month period ended
March 31, 2017 is presented based on IAS 18.
|
|
|
|
|
For the three-month period ended March 31, 2018
(In millions of yen)
|
|
|
Reportable segments
|
|
|
|
|
|
|
Core business
|
|
Strategic business
|
|
Total
|
|
Corporate expenses
and adjustments
(1)
|
|
Consolidated
|
Revenue from external customers
|
|
42,713
|
|
6,063
|
|
48,776
|
|
(40)
|
|
48,736
|
Segment profit/(loss)
|
|
8,038
|
|
(7,141)
|
|
897
|
|
349
|
|
1,246
|
Depreciation and amortization expenses
|
|
1,969
|
|
364
|
|
2,333
|
|
(4)
|
|
2,329
|
|
(1)
|
|
Corporate expenses and adjustments mainly include differences
arising from separate exchange rates used in management accounting,
other operating income and share-based compensation expenses
|
|
|
|
|
The reconciliation of segment profit to profit/(loss) before tax
from continuing operations is as follows:
|
|
|
(In millions of yen)
|
|
|
2017
|
|
2018
|
Segment profit
|
|
4,025
|
|
1,246
|
Financial income
|
|
25
|
|
99
|
Financial costs
|
|
(6)
|
|
(8)
|
Share of loss of associates and joint ventures
|
|
(794)
|
|
(1,804)
|
Loss on foreign currency transactions, net
|
|
(362)
|
|
(564)
|
Other non-operating income
|
|
678
|
|
976
|
Other non-operating expenses
|
|
-
|
|
(83)
|
Profit/(loss) before tax from continuing operations
|
|
3,566
|
|
(138)
|
|
|
|
|
|
The above items are not allocated to individual segments as these are
managed on an overall group basis.
(3) Revenues from Major Services
The Group's revenues from continuing operations from its major services
for the three-month periods ended March 31, 2017 and 2018 are as
follows. Revenues for the three-month period ended March 31, 2017 are
presented using IAS18 as the Group uses the modified retrospective
method in the adoption of IFRS15.
The difference in the amount of revenue from (2) Revenue and profit for
the Group’s operating segments are due to the exchange rate differences
used in management accounting.
Revenues recognized at one time consist mainly of revenues from Friends
services.
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
|
|
|
2017
|
|
2018
|
Core business
|
|
|
|
|
Advertising
|
|
|
|
|
Display advertising
(1)
|
|
4,925
|
|
9,128
|
Account advertising
(2)
|
|
8,955
|
|
13,468
|
Portal advertising
(3)
|
|
2,644
|
|
2,575
|
Sub-total
|
|
16,524
|
|
25,171
|
Communication, content, and others
|
|
|
|
|
Communication
(4)
|
|
8,067
|
|
7,415
|
Content
(5)
|
|
10,441
|
|
9,231
|
Others
|
|
668
|
|
864
|
Subtotal
|
|
19,176
|
|
17,510
|
Core business total
|
|
35,700
|
|
42,681
|
|
|
|
|
|
Strategic business
|
|
|
|
|
Friends
(6)
|
|
2,643
|
|
3,390
|
Others
(7)
|
|
573
|
|
2,665
|
Strategic business total
|
|
3,216
|
|
6,055
|
Total
|
|
38,916
|
|
48,736
|
(1)
|
|
Revenues from display advertising primarily consisted of fees from
advertisement on services such as Timeline and LINE NEWS.
|
(2)
|
|
Revenues from account advertising primarily consisted of fees from
LINE Official Accounts, Sponsored Stickers and LINE Points.
|
(3)
|
|
Revenues from portal advertising were mainly attributable to
advertising revenue from livedoor and NAVER Matome.
|
(4)
|
|
Revenues from communication were mainly attributable to sales of
LINE Stickers and Creator Stickers.
|
(5)
|
|
Revenues from content primarily consisted of sales of LINE GAMES's
virtual items.
|
(6)
|
|
Friends primarily consisted of revenues from sales of character
goods.
|
(7)
|
|
Others primarily consisted of revenues from LINE Mobile service.
|
|
|
|
5.
Property and Equipment
During the three-month periods ended March 31, 2017 and 2018, the Group
acquired property and equipment with a cost of 5,508 million yen and
4,672 million yen, respectively. During the three-month period ended
March 31, 2017, such purchases mainly consisted of furniture and fixture
in the amount of 4,724 million yen, which includes the recognition of
asset retirement obligations in the amount of 2,073 million yen, related
to the relocation of the headquarter offices. During the three-month
period ended March 31, 2018, such purchases mainly consisted of servers
infrastructures in the amount of 3,348 million yen related to the Core
business segment and Strategic business segment.
Contractual commitments for the acquisition of property and equipment as
of December 31, 2017 and March 31, 2018 were 527 million yen and 703
million yen, respectively.
6.
Income Taxes
The Group’s tax provision for interim periods is determined using an
estimate of the Group’s annual effective tax rate, adjusted for discrete
items arising during the period. In each quarter the Group updates the
estimate of the annual effective tax rate, and if the estimated annual
tax rate changes, the Group makes a cumulative adjustment in that
quarter.
The effective tax rate for the three-month period ended March 31, 2017
of 54.2% differed from the Japanese statutory tax rate of 33.1 % for the
year ended December 31, 2016. The effective income tax rate of 54.2% was
primarily due to pre-tax losses recorded by subsidiaries on a standalone
basis and pre-tax losses recorded by associates and joint ventures for
which no deferred tax assets were recognized as the related tax benefits
could not be recognized.
The effective tax rate for the three-month period ended March 31, 2018
of (1,182.1)% differed from the Japanese statutory tax rate of 31.7% for
the year ended December 31, 2017. The effective income tax rate of
(1,182.1)% was primarily due to pre-tax losses recorded by subsidiaries
on a standalone basis and pre-tax losses recorded by associates and
joint ventures for which no deferred tax assets were recognized as the
related tax benefits could not be recognized.
The effective tax rate for the three-month period ended March 31, 2018
was (1,182.1)% compared to the effective tax rate of 54.2% for the
three-month period ended March 31, 2017. This change resulted mainly due
to increase in deductible temporary differences arising from increase in
the share of loss of associates and joint ventures which were not
expected to be realized within a foreseeable period. The change was also
due to increase in the amount of pre-tax losses recorded by certain
subsidiaries as expenses such as subcontract expenses increased while
the amount of deductible temporary differences which the Group could not
recognize for tax benefits increased.
7.
Financial Assets and Financial Liabilities
The carrying amounts and fair value of financial instruments, except for
cash and cash equivalents, by line item in the Interim Condensed
Consolidated Statement of Financial Position and by category as defined
in IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9
Financial Instrument, as of December 31, 2017 and March 31, 2018
respectively, are as follows:
The fair value is not disclosed for those financial instruments which
are not measured at fair value in the Interim Condensed Consolidated
Statement of Financial Position, and whose fair value approximates their
carrying amount due to their short-term and/or variable-interest bearing
nature. Refer to Note 12 Fair Value Measurements for more details of the
available-for-sale financial assets, which are measured at fair value.
(In millions of yen)
|
|
|
December 31, 2017
|
|
March 31, 2018
|
Items
|
|
Book value
|
|
Fair value
|
|
Book value
|
|
Fair value
|
Financial assets
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
|
|
|
|
|
|
Financial assets at amortized cost
|
|
-
|
|
|
|
38,633
|
|
|
Loans and receivables
|
|
42,892
|
|
|
|
-
|
|
|
Total
|
|
42,892
|
|
|
|
38,633
|
|
|
Other financial assets, current
|
|
|
|
|
|
|
|
|
Financial assets at amortized cost
|
|
|
|
|
|
|
|
|
Time deposits
|
|
-
|
|
|
|
13,785
|
|
|
Short-term loans
|
|
-
|
|
|
|
423
|
|
|
Office security deposits
|
|
-
|
|
|
|
187
|
|
|
Financial assets at FVOCI
|
|
-
|
|
-
|
|
3,076
|
|
3,076
|
Loans and receivables
|
|
|
|
|
|
|
|
|
Time deposits
|
|
12,002
|
|
|
|
-
|
|
|
Short-term loans
|
|
206
|
|
|
|
-
|
|
|
Corporate bonds and other debt instruments
|
|
849
|
|
|
|
-
|
|
|
Available-for-sale financial assets
|
|
6
|
|
6
|
|
-
|
|
-
|
Office security deposits
|
|
195
|
|
|
|
-
|
|
|
Total
|
|
13,258
|
|
|
|
17,471
|
|
|
Other financial assets, non-current
|
|
|
|
|
|
|
|
|
Financial assets at amortized cost
|
|
|
|
|
|
|
|
|
Corporate bonds and other debt instruments
|
|
-
|
|
-
|
|
280
|
|
290
|
Guarantee deposits
(1)
|
|
-
|
|
-
|
|
714
|
|
|
Office security deposits
|
|
-
|
|
|
|
5,820
|
|
5,664
|
Financial assets at FVOCI
|
|
-
|
|
-
|
|
19,725
|
|
19,725
|
Financial assets at fair value through profit or loss
|
|
-
|
|
-
|
|
8,074
|
|
8,074
|
Held-to-maturity investments
(1)
|
|
280
|
|
291
|
|
-
|
|
-
|
Loans and receivables
|
|
|
|
|
|
|
|
|
Corporate bonds and other debt instruments
|
|
7,986
|
|
8,036
|
|
-
|
|
-
|
Guarantee deposits
(1)
|
|
726
|
|
|
|
-
|
|
|
Office security deposits
|
|
5,709
|
|
5,546
|
|
-
|
|
-
|
Financial assets at fair value through profit or loss
|
|
|
|
|
|
|
|
|
Conversion right and redemption right of preferred stock
|
|
1,862
|
|
1,862
|
|
-
|
|
-
|
Available-for-sale financial assets
(2)
|
|
15,388
|
|
15,388
|
|
-
|
|
-
|
Other
|
|
133
|
|
|
|
90
|
|
|
Total
|
|
32,084
|
|
|
|
34,703
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
December 31, 2017
|
|
March 31, 2018
|
Items
|
|
Book value
|
|
Fair value
|
|
Book value
|
|
Fair value
|
Financial liabilities
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
|
|
|
|
|
|
Financial liabilities at amortized cost
|
|
28,810
|
|
|
|
27,702
|
|
|
Other financial liabilities, current
|
|
|
|
|
|
|
|
|
Financial liabilities measured at amortized cost
|
|
|
|
|
|
|
|
|
Deposits received
|
|
5,730
|
|
|
|
9,505
|
|
|
Short-term borrowings
(3)
|
|
22,224
|
|
|
|
22,148
|
|
|
Others
|
|
46
|
|
|
|
51
|
|
|
Financial liabilities at fair value through profit or loss
|
|
|
|
|
|
|
|
|
Put option liabilities
|
|
3
|
|
|
|
229
|
|
|
Total
|
|
28,003
|
|
|
|
31,933
|
|
|
Other financial liabilities, non-current
|
|
|
|
|
|
|
|
|
Financial liabilities at amortized cost
|
|
|
|
|
|
|
|
|
Office security deposits received under sublease agreement
|
|
23
|
|
23
|
|
23
|
|
23
|
Others
|
|
93
|
|
|
|
98
|
|
|
Financial liabilities at fair value through profit or loss
|
|
|
|
|
|
|
|
|
Put option liabilities
|
|
486
|
|
486
|
|
229
|
|
229
|
Total
|
|
602
|
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Japanese Payment Services Act requires non-banking entities that
engage in business activities involving advance payments from end
users using virtual credits to secure a certain amount of money
equal to or more than one half of the unused balance of virtual
credits purchased by the end users as of the most recent base date
set on March 31 and September 30 of each year, either by depositing
or entrusting a cash reserve or government bonds with the Legal
Affairs Bureau, or by concluding a guarantee contract with a
financial institution. If deposits are made, they are recorded as
guarantee deposits. If guarantee contracts are entered into,
guarantee fees equal to the contractual amount times a guarantee fee
rate are incurred. In accordance with the Japanese Payment Services
Act, the Group had deposited cash of 635 million yen as of December
31, 2017 and 635 million yen as of March 31, 2018. The Group also
had deposited investments in Japanese government bonds of 280
million yen as of December 31, 2017 and 280 million yen as of March
31, 2018, respectively, which the Group intends to hold until
maturity for this purpose. In addition, the Group had credit
guarantee contracts with banks for 12,500 million yen with a
weighted average guarantee fee rate of 0.1% and for 13,500 million
yen with a weighted average guarantee fee rate of 0.1% as of
December 31, 2017 and as of March 31, 2018, respectively, to comply
with the Japanese Payment Services Act.
|
(2)
|
|
Gain on sales of 544 million yen was recognized for
available-for-sale financial assets for the three-month period ended
March 31, 2017.
|
(3)
|
|
The weighted average interest rate of the remaining outstanding
short-term borrowings was 0.1% as of December 31, 2017 and 0.1 % as
of March 31, 2018.
|
|
|
|
8.
Issued Capital and Reserves
(1)
Shares issued
The movements of shares issued for the three-month period ended March
31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares issued
(Share capital with
no-par
value)
|
|
Share capital
(In millions of yen)
|
|
|
January 1, 2018
|
|
238,496,810
|
|
92,369
|
|
|
Exercise of stock options
(1)
|
|
288,500
|
|
360
|
|
|
March 31, 2018
|
|
238,785,310
|
|
92,729
|
(1)
Refer to Note 13 Share-Based Payments for further details.
(2)
Share premium
The movements in share premium for the three-month period ended March
31, 2017 are as follows:
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
Share-based
payments
(1)
|
|
Common
control
business
combinations
|
|
Others
(2)
|
|
Share
premium total
|
January 1, 2017
|
|
21,935
|
|
294
|
|
68,979
|
|
91,208
|
Share-based payments
|
|
748
|
|
—
|
|
—
|
|
748
|
Exercise of stock options
|
|
(2,248)
|
|
—
|
|
1,793
|
|
(455)
|
Forfeiture of stock options
|
|
(8)
|
|
—
|
|
—
|
|
(8)
|
Cost related to issuance of common shares
(3)
|
|
—
|
|
—
|
|
(6)
|
|
(6)
|
Acquisition of non-controlling interests
|
|
—
|
|
—
|
|
(46)
|
|
(46 )
|
March 31, 2017
|
|
20,427
|
|
294
|
|
70,720
|
|
91,441
|
The movements in share premium for the three-month period ended March
31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
Share-based
payments
(1)
|
|
Common
control
business
combinations
|
|
Others
(2)
|
|
Share
premium total
|
January 1, 2018
|
|
7,062
|
|
294
|
|
86,204
|
|
93,560
|
Share-based payments
|
|
586
|
|
—
|
|
—
|
|
586
|
Exercise of stock options
|
|
(528 )
|
|
—
|
|
440
|
|
(88 )
|
Forfeiture of stock options
|
|
—
|
|
—
|
|
—
|
|
—
|
Cost related to issuance of common shares
(3)
|
|
—
|
|
—
|
|
(1)
|
|
(1 )
|
Acquisition of non-controlling interests
|
|
—
|
|
—
|
|
—
|
|
—
|
March 31, 2018
|
|
7,120
|
|
294
|
|
86,643
|
|
94,057
|
(1)
|
|
Refer to Note 13 Share-Based Payments for further details.
|
(2)
|
|
Resulted mainly from capital reserve requirements under the
Companies Act of Japan.
|
(3)
|
|
Incremental costs directly attributable to the issue of common
shares are recognized as a deduction from equity, net of any tax
effects.
|
|
|
|
9. Revenue from contracts with customers
The Group has recognized the following amounts relating to revenue in
the Interim Condensed Consolidated Statement of Profit or Loss for the
three-month period ended March 31, 2018:
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
2018
|
|
|
Revenue from contracts with customers
|
|
|
|
|
Revenue
(1)
|
|
48,736
|
|
|
Other operating income: virtual credits breakage income
|
|
68
|
|
|
|
|
48,804
|
|
|
Revenue from other sources
|
|
|
|
|
Other operating income
|
|
1,405
|
|
|
(1)
Refer to Note 4. Segment Information for further
details of revenue per segment.
|
Trade and other receivables, contract assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
|
|
January 1,
2018
|
|
March 31,
2018
|
|
|
Trade and other receivables
|
|
41,663
|
|
38,633
|
|
|
Contract assets
(1)
|
|
437
|
|
307
|
|
|
Contract liabilities
|
|
|
|
|
|
|
|
|
Unsatisfied performance obligations
(2)
|
|
12,778
|
|
12,670
|
|
|
|
|
Virtual credits
(3)
|
|
11,201
|
|
11,801
|
|
|
Total contract liabilities
|
|
23,979
|
|
24,471
|
|
|
(1)
|
|
Contract assets mainly consists of transactions related to the
advertising contracts in which the revenues from these transactions
are recognized over time by measuring the progress towards
completion of satisfaction of the performance obligations.
|
|
|
(2)
|
|
Unsatisfied performance obligations will be fulfilled within a
year.
|
|
|
(3)
|
|
The timing of transfer of goods or services related to virtual
credits is determined at the customer's discretion.
|
Revenue recognized in relation to contract liabilities which were
outstanding as of January 1, 2018 are as follow:
|
|
(In millions of yen)
|
|
|
|
|
January 1,
2018
|
|
|
Unsatisfied performance obligation
|
|
7,956
|
|
|
Virtual credits
|
|
4,024
|
|
|
|
|
|
The Group recorded 747 million yen of contract costs as of March 31,
2018 in the Interim Condensed Consolidated Statement of Financial
Position and amortization expenses of such assets during the three-month
period ended March 31, 2018 was 446 million yen.
10.
Discontinued Operations
On February 12, 2016, the board of directors approved the abandonment of
the MixRadio segment. The operation of the MixRadio business was
classified as a discontinued operation on March 21, 2016, when the
abandonment took effect.
The aggregated results of the discontinued operations for the
three-month periods ended March 31, 2017 and 2018 are presented below.
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
2017
|
|
2018
|
|
|
Revenues
|
|
—
|
|
6
|
|
|
Expenses
|
|
(5)
|
|
0
|
|
|
Loss before tax from discontinued operations
|
|
(5)
|
|
6
|
|
|
Income taxes on disposal
(1)
|
|
2
|
|
(2)
|
|
|
Loss for the period from discontinued operations (attributable to
the shareholders of the Company)
|
|
(3)
|
|
4
|
(1)
|
|
The income taxes for the three-month periods ended March 31, 2017
and 2018 are mainly due to the deductible temporary difference
arising from the investment in MixRadio Limited, which incurred loss
during the period.
|
|
|
|
The aggregated cash flow information for the discontinued operations for
the three-month periods ended March 31, 2017 and 2018 are presented
below.
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
2017
|
|
2018
|
|
|
Operating
|
|
(93)
|
|
(5)
|
|
|
Investing
|
|
—
|
|
—
|
|
|
Financing
|
|
—
|
|
—
|
|
|
Net cash outflow
|
|
(93)
|
|
(5)
|
|
|
|
|
|
|
|
11.
Earnings per Share
The profit or loss for the period and the weighted average number of
shares used in the calculation of earnings per share are as follows:
|
For the three-month period ended March 31
|
(In millions of yen, except number of shares)
|
|
|
2017
|
|
2018
|
Profit/(loss) for the period attributable to the shareholders of the
Company from continuing operations
|
|
1,440
|
|
(1,387)
|
(Loss)/profit for the period attributable to the shareholders of the
Company from discontinued operations
|
|
(3)
|
|
4
|
Total profit/(loss) for the period attributable to the
shareholders of the Company for basic and diluted earnings per share
|
|
1,437
|
|
(1,383)
|
Weighted average number of total common shares
|
|
218,411,890
|
|
238,631,431
|
Weighted average number of total treasury shares
|
|
-
|
|
(1,007,710)
|
Weighted average number of common shares for basic earnings per
share
(1)
|
|
218,411,890
|
|
237,623,721
|
Effect of dilution:
|
|
|
|
|
Stock options
|
|
18,572,211
|
|
-
|
Employee Stock Ownership Plan (J-ESOP)
|
|
-
|
|
-
|
Weighted average number of total common shares adjusted for the
effect of dilution
|
|
236,984,101
|
|
237,623,721
|
|
|
|
|
|
In calculating diluted earnings per share, share options outstanding and
other potential shares are taken into account where their impact is
dilutive.
Potential common shares used in the calculation of diluted earnings per
share for the three-month period ended March 31, 2017, included options
representing 21,684,500 which were outstanding as of March 31, 2017 as
they had a dilutive impact on profit per share from continuing
operations.
Potential common shares used in the calculation of diluted earnings per
share for the three-month period ended March 31, 2018, excluded options
representing 5,501,813 which were outstanding as of March 31, 2018 as
they had a antidilutive impact on profit per share from continuing
operations.
|
|
|
12.
|
|
Fair Value Measurements
|
(1)
|
|
Fair value hierarchy
|
|
|
The Group referred to the levels of the fair value hierarchy for
financial instruments measured at fair value on the Interim
Condensed Consolidated Statement of Financial Position based on the
following inputs:
|
|
|
•
|
|
Level 1 inputs are quoted prices in active markets for identical
assets or liabilities.
|
|
|
•
|
|
Level 2 inputs are quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted
prices that are observable, and inputs that are derived principally
from or corroborated by observable market data by correlation or
other means.
|
|
|
•
|
|
Level 3 inputs are derived from valuation techniques in which one or
more significant inputs or value drivers are unobservable, which
reflect the reporting entity’s own assumptions that market
participants would use in establishing a price.
|
|
|
Transfers between levels of the fair value hierarchy are recognized
as if they have occurred at the beginning of the reporting period.
|
(2)
|
|
Fair value measurements by fair value hierarchy
|
|
|
Assets and liabilities measured at fair values on a recurring basis
in the Interim Condensed Consolidated Statement of Financial
Position as of December 31, 2017 and March 31, 2018 are as follows:
|
(In millions of yen)
|
December 31, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial asset at fair value through profit or loss
|
|
|
|
|
|
|
|
|
Conversion right and redemption right of preferred stock
|
|
—
|
|
—
|
|
1,862
|
|
1,862
|
Available-for-sale financial assets
|
|
|
|
|
|
|
|
|
Listed equity investments
|
|
1,574
|
|
—
|
|
—
|
|
1,574
|
Private equity and other financial instruments
|
|
—
|
|
—
|
|
13,820
|
|
13,820
|
Total
|
|
1,574
|
|
—
|
|
15,682
|
|
17,256
|
Financial liability at fair value through profit or loss
|
|
|
|
|
|
|
|
|
Put option liabilities
|
|
—
|
|
—
|
|
486
|
|
486
|
Total
|
|
—
|
|
—
|
|
486
|
|
486
|
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
March 31, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets at fair value through profit or loss
|
|
—
|
|
—
|
|
8,074
|
|
8,074
|
Financial assets at FVOCI
|
|
|
|
|
|
|
|
|
Equity instruments
|
|
1,573
|
|
—
|
|
10,444
|
|
12,017
|
Debt instruments
|
|
—
|
|
10,784
|
|
—
|
|
10,784
|
Total
|
|
1,573
|
|
10,784
|
|
18,518
|
|
30,875
|
Financial liability at fair value through profit or loss
|
|
|
|
|
|
|
|
|
Put option liabilities
|
|
—
|
|
—
|
|
458
|
|
458
|
Total
|
|
—
|
|
—
|
|
458
|
|
458
|
|
|
|
|
|
|
|
|
|
There have been no transfers among Level 1 and Level 2 during the fiscal
year ended December 31, 2017 and three-month period ended March 31,
2018, except for the transfer from Level 1 to Level 3 as described in
(3) below.
(3) Reconciliations from the opening balance to the closing balance of
financial instruments categorized within Level 3 are as follows:
(In millions of yen)
|
|
|
2017
|
|
2018
|
|
|
Private equity
investments and
other financial
instruments
|
|
Conversion right
and redemption
right of preferred
stock
|
|
Private equity
investments and
other financial
instruments
|
|
Put option
liabilities
|
Fair value as of January 1
(4)
|
|
12,795
|
|
325
|
|
15,682
|
|
(486)
|
Total gain for the period:
|
|
|
|
|
|
|
|
|
Included in profit or loss
(1)
|
|
138
|
|
99
|
|
900
|
|
16
|
Included in other comprehensive
income
(2)
|
|
322
|
|
—
|
|
394
|
|
—
|
Comprehensive income
|
|
460
|
|
99
|
|
1,294
|
|
16
|
Purchases
|
|
1,309
|
|
—
|
|
2,108
|
|
—
|
Sales
|
|
(142)
|
|
—
|
|
—
|
|
—
|
Others
|
|
—
|
|
—
|
|
(38)
|
|
(3)
|
Transfers in
(3)
|
|
326
|
|
—
|
|
—
|
|
—
|
Effect of exchange rate changes
|
|
376
|
|
14
|
|
(528)
|
|
15
|
Fair value as of March 31
|
|
15,124
|
|
438
|
|
18,518
|
|
(458)
|
(1)
|
|
This amount is included in “Other non-operating income” or “Other
non-operating expenses” in the Group’s Interim Condensed
Consolidated Statement of Profit or Loss.
|
(2)
|
|
This amount is included in “Net changes in fair value” of
available-for-sale financial assets and of equity instruments at
FVOCI in the Group’s Interim Condensed Consolidated Statement of
Comprehensive Income.
|
(3)
|
|
During the three-month period ended March 31, 2017, a company was
delisted from a stock exchange in the US subsequent to our purchase
of its equity securities. Accordingly, such equity investment was
transferred from Level 1 to Level 3.
|
(4)
|
|
This amount includes the conversion right and redemption right of
preferred stock with fair values of 1,862 million yen recorded as of
December 31, 2017. Refer to Note 3 Significant accounting policies
for further details.
|
|
|
|
(4) Valuation techniques and inputs
Assets and liabilities measured at fair value on a recurring basis in
the Interim Condensed Consolidated Statements of Financial Position
Financial asset at fair value through profit or loss
Financial asset at fair value through profit or loss categorized within
Level 3 primarily consist of private equity investment funds, unlisted
equity securities and conversion right and redemption right of preferred
stock. Conversion right and redemption right of preferred stock are
measured at fair value using a binomial option pricing model as of
December 31, 2017 and March 31, 2018. Private equity investment funds
are measured at fair value based on net asset value and unlisted equity
securities are measured at fair value either based on the most recent
transactions, the market approach, or the discount cash flow model as of
March 31, 2018.
Below is the quantitative information regarding the valuation technique
and significant unobservable inputs used in measuring the fair value of
financial asset at fair value through profit or loss:
Valuation technique
|
|
Significant
unobservable input
|
|
December 31,
2017
|
|
March 31,
2018
|
Binomial option pricing model
|
|
Comparable listed companies’ average historical volatility
|
|
46.0% - 49.2%
|
|
47.4%
|
|
|
Discount rate
|
|
2.5%
|
|
2.6%
|
Market approach - market comparable companies
|
|
EBITDA multiple
|
|
—
|
|
11.5
|
|
|
Revenue multiple
|
|
—
|
|
1.4 - 2.9
|
Discount cash flow model
|
|
Discount rate
|
|
—
|
|
12.9%
|
|
|
Growth rate
|
|
—
|
|
1.0%
|
|
|
|
|
|
|
|
A significant increase (decrease) in the comparable listed companies ’
average historical volatility would result in a higher (lower) fair
value of the conversion right and redemption right of preferred stock,
while a significant increase (decrease) in the discount rate would
result in a lower (higher) fair value of the conversion right and
redemption right of preferred stock.
A significant increase (decrease) in the EBITDA, revenue multiple and
growth rate would result in a higher (lower) fair value of the unlisted
equity securities, while a significant increase (decrease) in the
discount rate would result in a lower (higher) fair value of the
unlisted equity securities.
Put option liabilities
The put option liabilities are options written on shares of
subsidiaries, associates, and investments. Such put option liabilities
are measured at fair value using mainly option pricing model or the
Monte Carlo simulation. Below is the quantitative information regarding
the valuation techniques and significant unobservable inputs used in
measuring the fair value of certain put option liabilities:
Valuation technique
|
|
Significant
unobservable input
|
|
December 31,
2017
|
|
March 31,
2018
|
Option pricing model
|
|
Comparable listed companies' average historical volatility
|
|
45.0%
|
|
45.0%
|
|
|
Discount rate
|
|
4.3%
|
|
4.3%
|
Monte Carlo simulation
|
|
Comparable listed companies’ average historical volatility
|
|
41.4% - 49.2%
|
|
39. 9% - 52.2%
|
|
|
Discount rate
|
|
2.5%
|
|
2.1% - 14.0%
|
A significant increase (decrease) in the comparable listed companies'
average historical volatility would result in a higher (lower) fair
value of the put option liabilities, while a significant increase
(decrease) in the discount rate would result in a lower (higher) fair
value of the put option liabilities.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income
categorized within Level 3 consist of unlisted equity securities.
Unlisted equity securities are measured at fair value either based on
the market approach or the discount cash flow model. Below is the
quantitative information regarding the valuation techniques and
significant unobservable inputs used in measuring the fair value of
certain unlisted equity securities:
Valuation technique
|
|
Significant
unobservable input
|
|
December 31,
2017
|
|
March 31,
2018
|
Market approach - market comparable companies
|
|
EBITDA multiple
|
|
—
|
|
11.4 - 13.6
|
|
|
EBIT multiple
|
|
—
|
|
11.4-13.7
|
|
|
Revenue multiple
|
|
—
|
|
2.7 - 6.0
|
|
|
Liquidity discount
|
|
—
|
|
30%
|
Discount cash flow model
|
|
Discount rate
|
|
—
|
|
12.9%
|
|
|
Growth rate
|
|
—
|
|
1.0%
|
A significant increase (decrease) in the EBITDA, EBIT, revenue multiple,
and growth rate would result in a higher (lower) fair value of the
unlisted equity securities, while a significant increase (decrease) in
the liquidity discount and discount rate would result in a lower
(higher) fair value of the unlisted equity securities.
Private equity and other financial instruments
Available-for-sale financial assets categorized within Level 3 mainly
consist of unlisted equity securities and private equity investment
funds. Private equity investment funds were measured at fair value based
on net asset value as of December 31, 2017. Unlisted equity securities
are measured at fair value either based on the most recent transactions,
the market approach and option pricing model, or the discount cash flow
model. Below is the quantitative information regarding the valuation
techniques and significant unobservable inputs used in measuring the
fair value of certain unlisted equity securities:
|
|
|
|
|
|
|
Valuation technique
|
|
Significant
unobservable input
|
|
December 31,
2017
|
|
March 31,
2018
|
Market approach – market comparable companies
|
|
EBITDA multiple
|
|
11.6-12.8
|
|
—
|
|
|
EBIT multiple
|
|
11.4-19.3
|
|
—
|
|
|
Revenue multiple
|
|
1.4-6.2
|
|
—
|
|
|
Liquidity discount
|
|
30%
|
|
—
|
Option pricing model
|
|
Comparable listed companies' average historical volatility
|
|
49.7%-76.2%
|
|
—
|
|
|
Discount rate
|
|
(0.1%)-2.6%
|
|
—
|
Discount cash flow model
|
|
Discount rate
|
|
12.8% - 13.0%
|
|
—
|
|
|
Growth rate
|
|
1.0% - 2.0%
|
|
—
|
A significant increase (decrease) in the EBITDA, EBIT, revenue multiple
and growth rate would result in a higher (lower) fair value of the
unlisted equity securities, while a significant increase (decrease) in
the liquidity discount, comparable listed companies' average historical
volatility, and discount rate would result in a lower (higher) fair
value of the unlisted equity securities.
The valuation techniques and the valuation results of the Level 3
financial assets, including those performed by the external experts,
were reviewed and approved by the management of the Group.
13.
Share-Based Payments
The Group has stock option incentive plans for directors and employees.
(1) Stock Option Plan
For the stock options granted during the years ended December 31, 2013,
2014, and 2015, each stock option represents the right to purchase 500
common shares at a fixed price for a defined period of time. For the
stock options granted during the year ended December 31, 2017, each
stock option represents the right to purchase 100 common shares at a
fixed price for a defined period of time. The exercise price of stock
options, which were granted during the year ended December 31, 2013 was
344 yen, whereas that of those options, which were granted during the
years ended December 31, 2014 and 2015 was 1,320 yen. The exercise price
of stock options granted during the year ended December 31, 2017 was
4,206 yen.
The fair value of stock options is determined using the Black-Scholes
model, a commonly accepted stock option pricing method. Stock options
granted during the years ended December 31, 2013, 2014, and 2015 vest
after two years from the grant date and are exercisable for a period of
eight years from the vesting date. Stock options granted during the year
ended December 31, 2017 vest 25% of stock options per year over a period
of four years from the grant date and are exercisable from the vesting
date until July 18, 2027. Conditions for vesting and exercise of the
stock options require that those who received the allotment of stock
options continue to be employed by the Group from the grant date to the
vesting date, and from the grant date to the exercise date,
respectively, unless otherwise permitted by the board of directors.
i.
|
|
Movements during the three-month period ended March 31, 2018
|
|
|
The following table illustrates the number and weighted average
exercise prices (“WAEP”) of, and movements in, outstanding Common
Stock Options on a per-common-share basis during the period:
|
|
|
|
|
|
|
|
Common Stock Options
|
|
|
|
|
Number
(shares)
|
|
WAEP
(yen per share)
|
|
|
Outstanding at January 1, 2018
|
|
5,577,000
|
|
2,421
|
|
|
Granted during the period
|
|
—
|
|
—
|
|
|
Forfeited during the period
|
|
(60,100 )
|
|
4,206
|
|
|
Exercised during the period
(1)
|
|
(288,500 )
|
|
943
|
|
|
Expired during the period
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2018
|
|
5,228,400
|
|
2,482
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2018
|
|
2,902,500
|
|
1,101
|
|
|
|
|
|
|
|
(1)
The weighted average share price at the date of exercise
of these options was 4,498 yen.
ii.
|
|
The exercise price and the number of shares for options outstanding
as of March 31, 2018 are as follows:
|
|
|
|
|
|
Grant dates
|
|
Exercise price
(yen)
|
|
Number
(Shares)
|
|
|
December 17, 2013
|
|
344
|
|
652,000
|
|
|
February 8, 2014
|
|
1,320
|
|
781,000
|
|
|
August 9, 2014
|
|
1,320
|
|
193,000
|
|
|
November 1, 2014
|
|
1,320
|
|
134,500
|
|
|
February 4, 2015
|
|
1,320
|
|
1,142,000
|
|
|
July 18, 2017
|
|
4,206
|
|
2,325,900
|
The weighted average remaining contractual life for the stock options
outstanding as of March 31, 2018 was 7.6 years.
iii.
|
|
The Group has recognized 748 million yen and 427 million yen of
share-based compensation expenses in the Interim Condensed
Consolidated Statement of Profit or Loss for the three-month periods
ended March 31, 2017 and 2018, respectively.
|
|
|
|
(2) Equity-settled Employee Stock Ownership Plan (J-ESOP)
The Group has a Group policy, the Regulations on Stock Compensation,
which regulates an incentive for the employees in line with the stock
price movement and for the purpose of securing excellent human resources
and their long-term success.
In accordance with the Regulations on
Stock Compensation, the Group has granted points equivalent to 262,069
shares and 26,946 shares to the employees of the Group on July 18, 2017
and January 1, 2018, respectively. The points vest once the employees
who received the points satisfy the conditions under the Regulations on
the Stock Compensation. As the points vest, the trust grants the
Company’s shares equivalent to the number of points, which the trust
owns, to the employees of the Company and its domestic subsidiary.
Under
the Regulations on Stock Compensation, the employees granted the points
on July 18, 2017 are required to be employed by the Group until the
vesting dates, which are set between April 1, 2018 and April 1, 2020.
The employees granted the points on January 1, 2018 are required to be
employed by the Group until the vesting dates, which are set between
October 1, 2018 and October 1, 2020.
i.
|
|
Movements during the three-month period ended March 31, 2018
|
The following table illustrates the movements in outstanding points
during the three-month period ended March 31, 2018:
|
|
|
|
J-ESOP
(Equity-settled)
|
|
|
|
|
Number
(Points
(1)
)
|
|
|
Outstanding at January 1, 2018
|
|
251,302
|
|
|
Granted during the period
|
|
26,946
|
|
|
Forfeited during the period
|
|
(4,835)
|
|
|
Exercised during the period
|
|
–
|
|
|
Expired during the period
|
|
–
|
|
|
Outstanding at March 31, 2018
|
|
273,413
|
|
|
Exercisable at March 31, 2018
|
|
–
|
|
|
(1)
One point is equal to one share.
|
|
|
|
ii.
|
|
The Group’s J-ESOP does not have an exercise price as the employees
receive the number of shares equivalent to the points, and the
weighted average remaining contractual life as of March 31, 2018 was
1.3 years.
|
iii.
|
|
The fair value of the points issued on January 1, 2018 was the share
price of the day the points were granted, 4,865 yen.
|
iv.
|
|
The expenses recognized in connection with share-based payments
during the three-month periods ended March 31, 2017 and 2018 are nil
and 158 million yen, respectively.
|
|
|
|
(3) Cash-settled Employee Stock Ownership Plan (J-ESOP)
In accordance with the Regulations on Stock Compensation, the Group has
granted points equivalent to 567,056 shares and 58,794 shares to the
employees of the Group on July 18, 2017 and on January 1, 2018,
respectively. The points vest once the employees who received the points
satisfy the conditions under the Regulations on the Stock Compensation.
As the points vest, the trust sells the shares of the Company which are
equivalent to the number of points in the market and distributes the
cash obtained from the transaction to the employees.
Under the Regulations on Stock Compensation, the employees granted the
points on July 18, 2017 are required to be employed by the Group until
the vesting dates, which are set between April 1, 2018 and April 1,
2020. The employees granted the points on January 1, 2018 are required
to be employed by the Group until the vesting dates, which are set
between October 1, 2018 and October 1, 2020.
i.
|
|
Movements during the three-month period ended March 31, 2018
|
The following table illustrates the movements in outstanding points
during the three-month period ended March 31, 2018:
|
|
|
|
J-ESOP
(Cash-settled)
|
|
|
|
|
Number
(Points
(1)
)
|
|
|
Outstanding at January 1, 2018
|
|
533,502
|
|
|
Granted during the period
|
|
58,794
|
|
|
Forfeited during the period
|
|
(13,170)
|
|
|
Exercised during the period
|
|
–
|
|
|
Expired during the period
|
|
–
|
|
|
Outstanding at March 31, 2018
|
|
579,126
|
|
|
Exercisable at March 31, 2018
|
|
–
|
|
|
(1)
One point is equal to one share.
|
|
|
|
|
|
ii.
|
|
The Group’s J-ESOP does not have an exercise price as the employees
receive the amount of cash equivalent to the points, and the
weighted average remaining contractual life as of March 31, 2018 was
1.3 years.
|
iii.
|
|
The fair value of the points granted on January 1, 2018 as of the
grant date and March 31, 2018 were 4,865 yen and 4,210 yen
respectively.
|
iv.
|
|
The expenses recognized in connection with share-based payments
during the three-month periods ended March 31, 2017 and 2018 are nil
and 348 million yen, respectively.
|
v.
|
|
The Group has recognized 805 million yen and 1,153 million yen of
liabilities associated with Cash-settled J-ESOP in the Interim
Condensed Consolidated Statement of Financial Position as of
December 31, 2017 and as of March 31, 2018, respectively. The amount
of the liabilities were not fixed as of December 31, 2017 and March
31, 2018.
|
|
|
|
14.
Related Party Transactions
The following tables provides the total amount of related party
transactions entered into during the three-month periods ended March 31,
2017 and 2018, as well as balances with related parties as of December
31, 2017 and March 31, 2018.
(1)
|
|
Significant related party transactions during the three-month period
ended March 31, 2017, and outstanding balances with related parties
as of December 31, 2017, are as follows:
|
(In millions of yen)
|
Relationship
|
|
Name
|
|
Transaction
|
|
Transaction
amount
|
|
Outstanding
receivable/
(payable)
balances
(3)
|
Parent company
|
|
NAVER
|
|
Advertising service
(1)
|
|
143
|
|
108
|
Subsidiary of parent company
|
|
NAVER Business Platform Corp.
(2)
|
|
Operating expenses
|
|
2,099
|
|
(976 )
|
|
|
|
|
|
|
|
|
|
(1)
|
|
LINE Plus Corporation and NAVER entered into an agreement for
exchange of services in which LINE Plus Corporation provides
advertising services via the LINE platform and the right to use
certain LINE characters in exchange for NAVER’s advertising services
for LINE Plus Corporation via NAVER’s web portal. The Group
generated advertising revenues of 143 million yen in connection with
the advertising services provided by NAVER for the three-month
period ended March 31, 2017.
|
(2)
|
|
This subsidiary of NAVER provided IT infrastructure services and
related development services to the Group
|
(3)
|
|
The receivable and payable amounts outstanding are unsecured and
will be settled in cash.
|
|
|
|
(2)
|
|
Significant related party transactions during the three-month period
ended March 31, 2018 and outstanding balances with related parties
as of March 31, 2018, are as follows:
|
|
|
|
|
|
|
|
|
|
(In millions of yen)
|
Relationship
|
|
Name
|
|
Transaction
|
|
Transaction
amount
|
|
Outstanding
receivable/
(payable)
balances
(3)
|
Parent company
|
|
NAVER
|
|
Advertising service
(1)
|
|
168
|
|
165
|
Subsidiary of parent company
|
|
NAVER Business Platform Corp.
(2)
|
|
Operating expenses
|
|
2,191
|
|
(1,000)
|
|
|
|
|
|
|
|
|
|
(1)
|
|
LINE Plus Corporation and NAVER entered into an agreement for
exchange of services in which LINE Plus Corporation provides
advertising services via the LINE platform and the right to use
certain LINE characters in exchange for NAVER’s advertising services
for LINE Plus Corporation via NAVER’s web portal. The Group
generated advertising revenues of 168 million yen in connection with
the advertising services provided to NAVER for the three-month
period ended March 31, 2018.
|
(2)
|
|
This subsidiary of NAVER provided IT infrastructure services and
related development services to the Group.
|
(3)
|
|
The receivable and payable amounts outstanding are unsecured and
will be settled in cash.
|
|
|
|
(3)
|
|
The total compensation of key management personnel for the
three-month periods ended March 31, 2017 and 2018 are as follows:
|
|
|
|
|
|
|
|
(In millions of yen)
|
|
|
|
|
2017
|
|
2018
|
|
|
Salaries (including bonuses)
|
|
128
|
|
281
|
|
|
Share-based payments
(1)
|
|
476
|
|
244
|
|
|
|
|
|
|
|
|
|
Total
|
|
604
|
|
525
|
|
|
|
|
|
|
|
(1)
|
|
Refer to Note 13 Share-Based Payments for further details.
|
|
|
Key management personnel include directors and corporate auditors of
the Company.
|
|
|
|
15.
Business Combinations
Acquisition in 2017
There was no business combination during the three-month period ended
March 31, 2017.
Acquisition in 2018
There was no significant business combination, individually or in
aggregate, during the three-month period ended March 31, 2018.
16.
Principal Subsidiaries
Information on subsidiaries
The table below includes subsidiaries which were newly consolidated
during the three-month period ended March 31, 2018, and subsidiaries in
which the Company’s percentage of ownership changed during such period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of ownership
|
Name
|
|
Primary business activities
|
|
Country of
incorporation
|
|
December 31,
2017
|
|
March 31,
2018
|
LINE Financial Corporation
|
|
Financial related services
|
|
Japan
|
|
—
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
Ultimate parent company of the Group
The next senior and the ultimate parent company of the Group is NAVER,
which is domiciled in Korea and listed on the Korea Exchange.
17.
Investments in Associates and Joint Ventures
Investment in Folio Co., Ltd.
In January 2018, the Group acquired 41.4% interest in Folio Co., Ltd. to
operate Folio Co., Ltd.’s online trading service and to develop
technologies together. The Group’s carrying amount of the investment in
this associate was 5,695 million yen as of March 31, 2018.
Third-party allotment by RABBIT-LINE PAY COMPANY LIMITED
In March 2018, RABBIT-LINE PAY COMPANY LIMITED, a joint venture of the
Group, issued its new shares to a third-party. As a result, the share of
the Group decreased from 50.0% to 33.3%, and the Group recorded the
dilution gain of 268 million yen due to the third-party allotment. The
Group’s carrying amount of the investment in this joint venture was
2,248 million yen as of March 31, 2018.
Third-party allotment by Snow Corporation
In March 2018, Snow Corporation, an associate of the Group, issued its
new shares to NAVER, and NAVER injected 4,886 million yen of additional
capital to Snow Corporation through the allotment. As a result, the
share of the Group decreased from 45.0% to 40.7%, and the Group recorded
the dilution gain of 969 million yen due to the third-party allotment.
The Group’s carrying amount of investment in this associate was 11,920
million yen as of March 31, 2018.
18.
Other Operating Expenses
Other operating expenses in the three-month period ended March 31, 2018,
consist of various operating expenses, including 1,874 million yen for
rent, 1,495 million yen of cost of goods, and 802 million yen for supply
expenses compared to 1,252 million yen, 809 million yen and 659 million
yen, respectively, in the three-month period ended March 31, 2017. Rent
and cost of goods increased mainly due to the expansion of businesses.
19.
Subsequent Events
Deconsolidation of a subsidiary into an associate
The procedures of the third-party allotment to SoftBank Corp. by LINE
Mobile Corporation, in the amount of 10,400 million yen, had completed
as of April 2, 2018. As a result, the Group’s ownership of LINE Mobile
Corporation has decreased from 100.0% to 49.0%, resulting in LINE Mobile
Corporation to be accounted for as an associate under the equity method.
The Group will recognize gain or loss due to the loss of control of the
subsidiary, and the Group is currently assessing the financial impacts
of the transaction.
Issuance of new shares through a third-party allotment
Based on the resolution at the meeting of the board of directors on
April 9, 2018, the Company issued 1,172,332 of new shares to Trust &
Custody Services Bank, Ltd. (Trust E) (the “Trust Bank”) through a third
party allotment and completed payment procedures for the issuance on
April 25, 2018. The total amount of issued, amount of share capital to
be increased, and amount of share premium to be increased are as follows:
Total amount issued
|
|
|
5,000 million yen
|
Amount of share capital to be increased
|
|
|
2,500 million yen
|
Amount of share premium to be increased
|
|
|
2,500 million yen
|
The shares of the Company held by the Trust Bank will be accounted for
in the same treatment as the treasury shares and will be recorded as an
offset to the share premium on the Interim Condensed Consolidated
Statement of Financial Position in the six-month period ending June 30,
2018.
2 Others
Not applicable.
B. Information on guarantors
Not applicable.
CONTACT:
LINE Corporation
Michiko Setsu, +81-3 4316 2104
Global
PR
dl_gpr@linecorp.co