Recognition of Valuation Loss on Investments in Consolidated and Affiliated Partnerships (Godo Kaisha) and Provision of Allowance for Doubtful Accounts, etc. in Non-consolidated Financial Results
As stated in "2. Impact on SBG’s consolidated financial results," there is no incremental impact from recording this loss in the non-consolidated financial results (Japan GAAP) on the consolidated financial results for the fiscal year ended March 31, 2022.
1. Outline of valuation loss on investments in consolidated and affiliated partnerships and provision of allowance for doubtful accounts, etc.
SB Northstar LP (“SB Northstar”) is an asset management subsidiary of SBG and has been acquiring and selling listed stocks and other instruments and engaging in derivative and credit transactions related to listed stocks, using surplus funds of SBG. SBG indirectly holds 67% and SBG’s Representative Director, Corporate Officer, Chairman & CEO Masayoshi Son indirectly holds 33% of interests in SB Northstar. As of March 31, 2022, SBG had (i) invested in Delaware Project 1 L.L.C., Delaware Project 2 L.L.C. and Delaware Project 3 L.L.C. (collectively the "Delaware Subsidiaries"), from which SB Northstar is funded, through its wholly owned subsidiary Northstar Godo Kaisha, and (ii) directly loaned a total of JPY 1,281,435 million to the Delaware Subsidiaries as entrusted funds. For this entrusted fund, the agreement provides that if the Delaware Subsidiaries have any unfunded repayment obligation to SBG at the end of the fund life of SB Northstar (12 years + 2-year extension), Masayoshi Son will pay his pro rata share of any such unfunded obligations based on his relative ownership percentage.
The JPY 629,746 million provision of allowance for doubtful accounts and others represents the estimated uncollectible amount of JPY 944,619 million for the balance of loans to the Delaware Subsidiaries of JPY 1,281,435 million, less an estimated amount of JPY 314,873 million of compensation to be borne by Masayoshi Son based on the aforementioned agreement. Disclosures in the non-consolidated financial statements have been presented in accordance with the accounting standards for financial instruments, including by offsetting loans and allowance for doubtful accounts with an amount of JPY 97,019 million, which is equivalent to the uncollected amount of interests and other income generated from the loans to date.
2. Impact on SBG’s consolidated financial results
In SBG’s quarterly IFRS consolidated financial results, investment gains and losses at SB Northstar are included as gains and losses on investment at Investment Business of Holding Companies on the statement of income. Net income attributable to owners of the parent reflects 67% of such investment gain (loss), as the interest of Masayoshi Son and the amount equivalent to the estimated amount of compensation are deducted as non-controlling interests from gain (loss) at SB Northstar. Therefore, there is no incremental impact on SBG’s consolidated financial results for the fiscal year ended March 31, 2022 from recording the abovementioned loss on valuation of investments in consolidated and affiliated partnerships and provision of allowance for doubtful accounts and others in its non-consolidated financial results.
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