TERMINOLOGY, FORMS & METHODS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS. COPYRIGHT RODERICK SEEMAN

Article 5. The Scope of Consolidation The company filing consolidated financial statements must include all its subsidiaries within the scope of consolidation. However, subsidiaries falling within any of the following are not to be consolidated.

i. Companies recognized to be lacking integral participation in the organization of the said company filing consolidated financial statements as they are under corporate reorganization, etc, such that in reality they are not in a control relationship with the company filing the consolidated financial statements.

ii. Bankrupt companies, liquidated companies, etc. which are companies no longer regarded as continuing in existence.

iii. Companies for which it is recognized that the company filing the consolidated financial statements (and when they have subsidiaries, including those subsidiaries), only temporarily holds a majority of their voting rights.

iv. Companies, other than those listed in any of the above, which are companies for which it is recognized that there may be concern over causing misunderstandings to interested and related parties of the company filing consolidated financial statements by including them within the scope of consolidation.

2. From among those subsidiaries which are to be included within the scope of consolidation based on the provisions of the previous Paragraph, those which are lacking in importance from the viewpoint of their assets and sales, etc which even if they are excluded from the scope of consolidation do not prevent a rational judgment concerning the financial conditions and operating results of the corporate group, can be excluded from thes scope of consolidation.

3. Matters in relation to the financial condition and operating conditions, etc of subsidiaries which are excluded from consolidation, based on the provisions of the proviso of Paragraph 1, where recognized as important in influencing judgments concerning the financial and operating conditions of the said corporate group, must be put in a note in the consolidated financial statements with the substance thereof.