LINE Corporation (NYSE:LN) (TOKYO:3938) (Headquarters:
Shinjuku-ku, Tokyo, Japan; Representative Director and President:
Takeshi Idezawa) announces additional information for the "Summary
of Consolidated Financial Results for the Three Months Ended March
31, 2018" announced on April 25, 2018, as follows.
The new information is in the following:
1. Interim condensed consolidated
financial statements
(1)
Interim condensed consolidated statement
of financial position - unaudited
(2)
Interim condensed consolidated statement
of profit or loss - unaudited
(3)
Interim condensed consolidated statement
of comprehensive income - unaudited
(4)
Interim condensed consolidated statement
of change in equity - unaudited
(5)
Notes to interim condensed consolidated
financial statements - unaudited
Notes for change in significant accounting
policies
Notes for segment information
Notes for going concern assumption
The attachment is a full version of the financial results
announcement for the fiscal year and the additional information is
not included on the pages other than those mentioned above.
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.
April 25, 2018
LINE Corporation Announces Summary
ofConsolidated Financial Resultsfor the Three Months
Ended March 31, 2018[Prepared in Accordance with the
International Financial Reporting Standards (“IFRS”)as
issued by the International Accounting Standards Board
(“IASB”)]
TOKYO -- LINE Corporation (NYSE: LN) (TOKYO: 3938) announces the
summary of its consolidated financial results for the three months
ended March 31, 2018.
Company name:
LINE Corporation (Stock Code: 3938)
(the “Company”)
Stock exchange on which the shares are listed: Tokyo Stock Exchange
URL:
http://linecorp.com/
Representative: Takeshi Idezawa, Chief Executive Officer Contact:
Kokan Ki, Executive Officer and Head of Finance and Accounting
Telephone: +81-3-4316-2050 Filing date of quarterly securities
report: May 10, 2018 Payment date of dividends: – Supplemental
materials prepared on quarterly financial results: Yes Financial
results conference scheduled: Yes (for institutional investors and
analysts)
(Yen amounts are rounded to the nearest
million, unless otherwise noted.)
1. Consolidated financial results for the first three
months of 2018 (from January 1, 2018 to March 31, 2018)
(1) Consolidated operating results
(cumulative)
(Percentages indicate year-on-year
changes.)
Revenues
Profit from operatingactivities
Profit before income taxes Profit for the period For the
three months ended Millions of yen % Millions of yen
% Millions of yen % Millions of yen % March 31, 2018
48,736 25.2 1,246 (69.0) (138) – (1,770) – March 31, 2017
38,916 16.3 4,025 (24.6) 3,566
(13.9) 1,632 –
Profit attributable to theshareholders of
theCompany
Comprehensive income forthe period
Basic earningsper share
Diluted earningsper share
For the three months ended Millions of yen % Millions of yen
% Yen Yen March 31, 2018 (1,383) – (4,431) – (5.82) (5.82)
March 31, 2017 1,437 – 2,799 –
6.58 6.07
(2) Consolidated financial
position
Total assets Total equity
Equity attributable tothe shareholders
ofthe Company
Ratio of equityattributable to
theshareholders of theCompany to totalassets
As of Millions of yen Millions of yen Millions of yen % March 31,
2018 297,935 185,165 181,095 60.8 December 31, 2017 303,439
189,977 185,075 61.0
2. Cash dividends
Annual dividends per share First quarter-end
Second quarter-end Third quarter-end Fiscal year-end
Total Yen Yen Yen Yen Yen
For the year endedDecember 31, 2017
– 0.00 – 0.00 0.00
For the year ending December31, 2018
–
For the year ending December31, 2018
(Forecast)
– – – – Note: Revisions to the cash dividends
forecasts most recently announced: None Concerning cash dividends
forecasts for the year ending December 31, 2018, it has not yet
made a decision.
3. Consolidated earnings forecasts for 2018 (from
January 1, 2018 to December 31, 2018)
Amid rapid international and domestic changes, there is a level
of uncertainty within the mobile applications market for
smartphones and other mobile devices, the main business of the
Company and its subsidiaries (collectively, the “Group”). As the
state of this market significantly impacts the Group’s financial
results, it is difficult to formulate a precise earnings forecast.
Furthermore, as the Company’s shares are listed on the New York
Stock Exchange as well as the Tokyo Stock Exchange, we are also
carefully considering risks relating to U.S. securities
regulations. Accordingly, an announcement concerning earnings
forecasts is not made at this time.
Notes
(1) Changes in significant subsidiaries during the current
period (changes in specified subsidiaries resulting in change in
scope of consolidation): None (2) Changes in accounting
policies and estimates a. Changes in accounting policies due to
revisions in accounting standards under IFRS: Yes b. Changes in
accounting policies due to other reasons: None c. Changes in
accounting estimates: None (3) Number of shares issued and
outstanding (common stock) a. Total number of common shares issued
and outstanding at the end of the period (including treasury
shares) As of March 31, 2018
238,785,310 shares
As of December 31, 2017 238,496,810 shares b. Number of treasury
shares at the end of the period As of March 31, 2018 1,007,710
shares As of December 31, 2017 1,007,710 shares c. Average number
of common shares outstanding during the period (cumulative from the
beginning of the fiscal year) For the three months ended March 31,
2018 237,623,721 shares For the three months ended March 31, 2017
218,411,890 shares
* Information regarding the quarterly
review procedures
This summary quarterly financial results report is exempt from
the quarterly consolidated financial statements review procedures
in accordance with the Financial Instruments and Exchange Act.
Additional time is needed to prepare the notes regarding IFRS
15, which was adopted in FY 2018. The Company intends to disclose
the Quarterly Consolidated Financial Statements and Significant
Notes as soon as they have been prepared. Supplementary information
to this earnings release, including the Company’s results by
segment, will be available today at the following IR website:
https://linecorp.com/en/ir/top.
1 Interim condensed consolidated
financial statements
(1) Interim Condensed Consolidated
Statement of Financial Position - Unaudited
(In millions of yen)
December 31,2017
March 31,2018
Assets Current assets Cash and cash equivalents
123,606 107,266 Trade and other receivables 42,892 38,633 Other
financial assets, current 13,258 17,471 Contract assets - 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 15,125 18,025 Goodwill 16,767 16,890 Other
intangible assets 6,486 6,179 Investments in associates and joint
ventures 24,844 30,084 Other financial assets, non-current 32,084
34,703 Deferred tax assets 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 28,810 27,702 Other
financial liabilities, current 28,003 31,933 Accrued expenses
12,087 11,089 Income tax payables 2,365 1,263 Contract liabilities
- 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 602 350
Deferred tax liabilities 1,573 1,799 Provisions, non-current 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 92,369 92,729 Share premium 93,560 94,057
Treasury shares (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 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,
2017 2018 Revenues and other operating
income: Revenues 38,916 48,736 Other operating income 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
(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
(1,476)
(2,329) Other operating expenses
(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
(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) Income tax expenses
(1,931)
(1,636)
Profit/(loss) for the period from continuing operations
1,635
(1,774)
(Loss)/profit from discontinued operations, net of tax
(3)
4
Profit/(loss) for the period 1,632 (1,770) Attributable
to: The shareholders of the Company 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 6.58 (5.82) Diluted profit/(loss) for the period
attributable to the shareholders of the Company 6.07 (5.82)
Earnings per share from continuing operations Basic profit/(loss)
from continuing operations attributable to the shareholders of the
Company 6.60 (5.84) Diluted profit/(loss) from continuing
operations attributable to the shareholders of the Company 6.08
(5.84) Earnings per share from discontinued operations Basic
(loss)/profit from discontinued operations attributable to the
shareholders of the Company
(0.02)
0.02 Diluted (loss)/profit from discontinued operations
attributable to the shareholders of the Company
(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,
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
-
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
1,241 - Reclassification to profit or loss
(544)
- Debt instruments at FVOCI Net changes in fair value - 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
Sharecapital Sharepremium
Treasury
shares
Accumulateddeficit
Foreigncurrencytranslationreserve
Available-for-sale reserve
Definedbenefit planreserve Total
Non-controllinginterests
Totalshareholders’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 — 748 — — — — — 748 —
748 Forfeiture of stock options —
(8)
— 8 — — — — — — Exercise of stock options 1,497
(461)
— — — — — 1,036 — 1,036 Acquisition of non-controlling interests —
(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 Sharecapital
Sharepremium Treasury
shares
Accumulateddeficit
Foreigncurrencytranslationreserve
Financial assetsat FVOCI
Definedbenefit planreserve Total
Non-controllinginterests
Totalshareholders’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 comprehensiveincome — — — — (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 — 586 — — — — — 586 — 586
Exercise of stock options 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) Notes to Interim Condensed Consolidated Financial
Statements – UnauditedNotes for change in 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 StickersThe 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 StickersThe 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 AdThe 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 servicesFor 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 thee-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
Balance atJanuary 1, 2018
underIAS 39
Financialassets/liabilitiesat fair value through
profitor loss
Financialassets/liabilitiesat FVOCI
Financialassets/liabilitiesat amortized
cost
Total
financialassets/liabilities
Fair valuemeasurementat
January 1,2018
Provision atJanuary 1,
2018
Total impacts
Financial assets Trade and other receivables Loans
and receivables 42,892 ― ― 42,892 42,892 ― ― ― Total 42,892 ― ―
42,892 42,892 ― ― ―
Other financial assets, current Loans
and receivables Time deposits 12,002 ― ― 12,002 12,002 ― ― ―
Short-term loans 206 ― ― 206 206 ― ― ― Corporate bonds and other
debt instruments 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 280
― ― 280 280 ― ― ― Loans and receivables Corporate bonds and other
debt instruments 7,986 28 7,997 ― 8,025 52 (13) 39 Guarantee
deposits 726 ― ― 726 726 ― ― ― Office security deposits 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 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
Balance atJanuary 1,2018
underIAS 39
Financialassets/liabilitiesat fair
valuethrough profitor loss
Financialassets/liabilitiesat FVOCI
Financialassets/liabilitiesat amortized
cost
Total
financialassets/liabilities
Fair valuemeasurementat
January 1,2018
Provision atJanuary 1,
2018
Total impacts
Financial liabilities Trade and other payables
Financial liabilities measured at amortized cost 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)
Accumulateddeficit
Financial assets atFVOCI
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 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
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
― 42 Increase in provision for debt instruments at FVOCI (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.
Notes for 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 expensesand
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 expensesand
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.
Notes for going concern assumption
Not applicable.
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version on businesswire.com: https://www.businesswire.com/news/home/20180509005653/en/
LINE CorporationMichiko Setsu, +81-3 4316 2104Global
PRdl_gpr@linecorp.co
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