Business risks
The following are items that may affect the business operations of our group.
Legal regulations concerning devices peripheral to amusement machines
Amusement arcades (pachinko parlors), or the end users of the Group’s mainstay products, are subject to the Act on Control and Improvement of Amusement Business as well as prefectural ordinances. Although products themselves are not subject to legal regulations, delays in inspections by prefectural public safety commissions when new amusement arcades are built or renovated may affect the Group’s business performance.
Legal regulations concerning amusement arcades
In accordance with the Act on Control and Improvement of Amusement Business, amusement arcades (with pachislot machines, or Japanese-version slot machines) must conform to the “technical standards” specified in the National Public Safety Commission Regulations (Regulations Concerning Certification and Model Inspection of Amusement Machines). Revisions to these standards may affect the Group’s business performance. Certification validity (period during which machines can be sold) for each pachinko/pachislot machine model is three years, as stipulated by the National Public Safety Commission’s regulations.
Legal regulations concerning food businesses
Food businesses are subject to legal regulations governing food safety and security for consumers such as the Food Sanitation Law, JAS Law, Product Labeling Law, and Product Liability Law, as well as environmental and recycling-related legal regulations such as the Container and Packaging Recycling Law and “Waste Disposal and Public Cleaning Act.” In the event of a health-related problem or other violation, the Group may issue a food recall (voluntary recall) or its business activities may be placed under restriction, thereby affecting business performance.
Litigation risks
The Group is strengthening its compliance system and taking measures to minimize the risk of lawsuits for damage claims, etc., such as exercising sufficient care to avoid infringement of the intellectual property rights of third parties. There is a possibility, however, that lawsuits may be filed against the Group in connection with transactions, etc., conducted by the Group.
Application of asset-impairment accounting
Under the Accounting Standard for Impairment of Fixed Assets, the book value of an asset group that shows signs of impairment shall be written down to the recoverable amount if the total undiscounted future cash flows from the asset group are less than its book value, and the difference shall be recognized as an impairment loss in the statement of income. If an impairment loss is recognized in the future, depending on earnings performance, the Group’s business performance and financial position may be affected.