6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Reportof Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16of

the Securities Exchange Act of 1934

For the month of ….	August	……………………………………………… ,	2023
CANON INC.
---
(Translation of registrant’s name into English)
30-2, Shimomaruko 3-Chome, Ohta-ku, Tokyo 146-8501, Japan
(Address of principal executive offices)

[Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F	X	Form 40-F

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes	No	X

[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-....................

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.

CANON INC.
(Registrant)
Date…	August 9, 2023	By....../s/.......... Sachiho Tanino.............
---	---	---
		(Signature)*
		<br>Sachiho Tanino<br><br><br><br>General Manager<br><br><br><br>Consolidated Accounting Div.<br><br><br><br>Canon Inc.

*Print the name and title of the signing officer under his signature.

The following materials are included.

1.	Quarterly Report filed with the Japanese government pursuant to the Financial Instruments and Exchange Law of<br>Japan for the second quarter ended June 30, 2023

[English summary with full translation of consolidated financial information]

Quarterly Report filed with the Japanese government

pursuant to

theFinancial Instruments and Exchange Law of Japan

For the second quarter ended

June 30, 2023

CANON INC.

Tokyo, Japan

CONTENTS

		Page
I	Corporate Information
	(1)   Consolidated Financial Summary		2
	(2)   Description of Business		2
II	The Business
	(1)   Risk Factors		3
	(2)   Operating Results and Financial Conditions		3
	(3)   Significant Business Contracts Entered into in the Second Quarter of<br>Fiscal 2023		11
III	Company Information
	(1)   Shares		12
	(2)   Directors and Executive Officers		17
IV	Financial Statements
	(1)   Consolidated Financial Statements		18
	(2)   Other Information		57

Disclaimer Regarding Forward-Looking Statements

This quarterly report includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) concerning Canon Inc. (the “Company”) and its subsidiaries (collectively “Canon”). To the extent that statements in this quarterly report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of Canon in light of the information currently available to them, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause Canon’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Canon undertakes no obligation to publicly update any forward-looking statements after the date of this quarterly report. Investors are advised to consult any further disclosures by Canon in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.

The risks, uncertainties and other factors referred to above include, but are not limited to, foreign currency exchange rate fluctuations; the uncertainty of Canon’s ability to implement its plans to localize production and other measures to reduce the impact of foreign currency exchange rate fluctuations; uncertainty as to economic conditions in Canon’s major markets; uncertainty of continued demand for Canon’s high-value-added products; Canon’s ability to continue to develop products and to market products that incorporate new technology on a timely basis, are competitively priced, and achieve market acceptance; the possibility of losses resulting from foreign currency transactions designed to reduce financial risks from changes in foreign currency exchange rates; disasters, outages or similar events; and inventory risk due to disruptions in supply chains and shifts in market demand.

1

I.	Corporate Information
(1)	Consolidated Financial Summary
---	---
	Millions of yen (except per share amounts)
---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Six months ended<br>June 30, 2023			Six months ended<br>June 30, 2022			Three months ended<br>June 30, 2023		Three months ended<br>June 30, 2022		Year ended<br>December 31, 2022
Net sales		1,992,007			1,878,149			1,020,882		998,799		4,031,414
Income before income taxes		188,662			152,893			101,128		85,196		352,440
Net income attributable to Canon Inc.		121,813			105,000			65,403		59,025		243,961
Comprehensive income (loss)		318,742			375,570			222,920		215,105		476,959
Canon Inc. shareholders’ equity		—			—			3,301,352		3,133,326		3,113,105
Total equity		—			—			3,545,059		3,363,751		3,349,030
Total assets		—			—			5,571,311		5,154,144		5,095,530
Net income attributable to Canon Inc. shareholders per share:
Basic (yen)		120.36			100.82			64.78		56.85		236.71
Diluted (yen)		120.31			100.79			64.75		56.83		236.63
Canon Inc. shareholders’ equity to total assets (%)		—			—			59.3		60.8		61.1
Net cash provided by operating activities		154,057			128,579			—		—		262,603
Net cash used in investing activities		(94,369	)		(83,395	)		—		—		(180,820	)
Net cash provided by (used in) financing activities		98,675			(22,509	)		—		—		(146,844	)
Cash and cash equivalents at end of period		—			—			542,209		454,322		362,101

Notes:

1.	Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted<br>accounting principles.
2.	Consumption tax is excluded from the stated amount of net sales.
---	---
(2)	Description of Business
---	---

Canon prepares quarterly consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Financial information presented in sections “II. The Business” is also in conformity with U.S. GAAP.

The Canon Group (consisting of the Company, 332 consolidated subsidiaries, and 10 affiliates accounted for using the equity method, as of June 30, 2023, collectively, the “Group”) is engaged in development, manufacturing, sales, and servicing activities in areas such as printing, imaging, medical, industrial and others and corporate. No material change in Canon’s business has occurred during the six months ended June 30, 2023.

No additions or removals of significant group entities have occurred during the six months ended June 30, 2023.

2

II.	The Business
(1)	Risk Factors
---	---

No new material risks have been identified during the six months ended June 30, 2023. No material changes have been identified pursuant to the risk factors of Canon’s business indicated in the Annual Securities Report (Yukashoken Houkokusho) of the previous fiscal year.

(2)	Operating Results and Financial Conditions

Looking back at the first half of 2023, although economic recovery showed signs of weakness in some regions, there was a moderate recovery overall. By region, in the United States, thanks to the strong employment situation, consumer spending remained steady. In Europe, however, the economy remained stagnant due to the downward pressure caused by rising interest rates. In China, despite domestic demand recovering thanks to the lifting of the government’s Zero-COVID strategy, the demand in real estate markets decreased. In other emerging countries, the economy remained solid, mostly centering around consumer spending and the service industry. In Japan, the economy recovered moderately driven by solid export, the recovery of consumer spending and capital investments.

In the markets in which Canon operates, while concerns about an economic slowdown due to inflation and rising interest rate affected some markets, businesses remained firm thanks to the recovery of supplies following the resolution of component shortages and logistical disruptions. On a product basis, demand for office multifunction devices (MFDs) remained firm thanks to strong demand for high-productivity printing. For inkjet printers, the demand from customers working from home slowed. For laser printers, while demand slowed due to the curbing of corporate investments, new demand was generated through diversifying work styles. For cameras, demand remained solid, mainly for mirrorless cameras. For medical equipment, while there was a drop-off following a period of increased demand last year in response to the COVID-19 pandemic, demand remained firm mainly in Europe. For semiconductor lithography equipment, although demand for memory devices declined, investments stayed robust mainly for power devices, analog devices, and sensors. For FPD (Flat Panel Display) lithography equipment, demand declined due to reduced investments by panel manufacturers.

The average value of the yen during the second quarter and the first half of the year was ¥137.57 and ¥135.09 against the U.S. dollar, respectively, a year-on-year depreciation of approximately ¥8 and a year-on-year depreciation of approximately ¥12, and ¥149.62 and ¥145.88 against the euro, respectively, a year-on-year depreciation of approximately ¥12 and a year-on-year depreciation of approximately ¥11.

3

(2)	Operating Results and Financial Conditions (continued)

[Second quarter results]

Summarized results of the consolidated statements of income for the three months ended June 30, 2023 and June 30, 2022 are as follows:

	Millions of yen (except per share amounts and percentage data)
	Three months ended<br>June 30, 2023		Change			Three months ended<br>June 30, 2022
Net sales		1,020,882		+2.2	%		998,799
Gross profit		484,771		+4.5			464,038
Operating expenses		392,497		+7.4			365,563
Operating profit		92,274		-6.3			98,475
Other income (deductions)		8,854		—			(13,279	)
Income before income taxes		101,128		+18.7			85,196
Net income attributable to Canon Inc.		65,403		+10.8			59,025
Net income attributable to Canon Inc. shareholders per share:
Basic		64.78		+13.9			56.85
Diluted		64.75		+13.9			56.83

As for the second quarter, net sales for the second quarter increased by 2.2% year-on-year to ¥1,020.9 billion due to solid demand and new products that were well-received in the market, as well as the favorable effects of depreciation of the yen. Net sales for the first half of the year increased by 6.1% year-on-year to ¥1,992.0 billion. Gross profit as a percentage of net sales increased by 1.0 points year-on-year to 47.5% due to well-received adjustments to product prices, improvement of product costs, resulting from easing of component shortages and logistics disruptions, and depreciation of the yen. Gross profit for the second quarter increased by 4.5% year-on-year to ¥484.8 billion. Operating expenses increased by 7.4% year-on-year to ¥392.5 billion due to an increase in sales personnel and sales-related expenses accompanying a growth in sales. In addition, operating expenses denominated in foreign currencies increased due to the depreciation of the yen. As a result, operating profit decreased by 6.3% year-on-year to ¥92.3 billion. On the other hand, operating profit for the first half of the year increased by 1.2% year-on-year to ¥176.7 billion. Other income (deductions) increased by ¥22.1 billion year-on-year to ¥8.9 billion, due to gain on valuation of securities and a decrease of currency exchange losses from liabilities denominated in foreign currencies. As a result, income before income taxes increased by 18.7% year-on-year to ¥101.1 billion and net income attributable to Canon Inc. increased by 10.8% year-on-year to ¥65.4 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥64.78 for the second quarter, a year-on-year decrease of ¥7.93.

4

(2)	Operating Results and Financial Conditions (continued)

[First-half results]

Summarized results of the consolidated statements of income for the six months ended June 30, 2023 and June 30, 2022 are as follows:

	Millions of yen (except per share amounts and percentage data)
	Six months ended  <br>June 30, 2023		Change			Six months ended  <br>June 30, 2022
Net sales		1,992,007		+6.1	%		1,878,149
Gross profit		938,781		+9.4			858,430
Operating expenses		762,032		+11.4			683,815
Operating profit		176,749		+1.2			174,615
Other income (deductions)		11,913		—			(21,722	)
Income before income taxes		188,662		+23.4			152,893
Net income attributable to Canon Inc.		121,813		+16.0			105,000
Net income attributable to Canon Inc. shareholders per share:
Basic		120.36		+19.4			100.82
Diluted		120.31		+19.4			100.79

As for the first half, net sales increased by 6.1% year-on-year to ¥1,992.0 billion due to a recovery of supply following a shortage of components and logistical disruptions, which had constrained business and solid demand and new products that were well-received in the market, as well as the favorable effects of depreciation of the yen. Gross profit as a percentage of net sales increased by 1.4 points year-on-year to 47.1%, due to well-received adjustments to product prices, improvement of product costs, resulting from easing of component shortages and logistics disruptions, and depreciation of the yen. Gross profit for the first half of the year increased by 9.4% year-on-year to ¥938.8 billion. Operating expenses increased by 11.4% year-on-year to ¥762.0 billion, due to an increase in sales personnel and sales-related expenses accompanying a growth in sales. In addition, operating expenses denominated in foreign currencies increased due to the depreciation of the yen. As a result, operating profit for the first half of the year increased by 1.2% year-on-year to ¥176.7 billion. Other income (deductions) increased by ¥11.9 billion year-on-year to ¥33.6 billion, due to gain on valuation of securities and a decrease of currency exchange losses from liabilities denominated in foreign currencies. As a result, income before income taxes for the first half of the year increased by 23.4% to ¥188.7 billion and first-half net income attributable to Canon Inc. increased by 16.0% to ¥121.8 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥120.36 for the first half, a year-on-year decrease of ¥19.54.

5

(2)	Operating Results and Financial Conditions (continued)

Operating results by segment (“business unit”) for the six months ended June 30, 2023 and June 30, 2022 are as follows:

Printing Business Unit	Millions of yen (except percentage data)
	Six months ended  <br>June 30, 2023		Change			Six months ended  <br>June 30, 2022
Net sales:
Office		477,354		+16.9	%		408,264
Prosumer		469,182		-7.2			505,738
Production		183,582		+13.9			161,188
External customers total		1,130,118		+5.1			1,075,190
Intersegment		2,966		+19.8			2,475
Total		1,133,084		+5.1			1,077,665
Operating cost and expenses		1,023,172		+6.8			958,150
Operating Profit		109,912		-8.0			119,515
Income before income taxes		114,726		-9.1			126,275

As for the Printing Business Unit, MFDs for offices continued to sell well, significantly exceeding unit sales of the same period from the previous year, as the product supply shortage was abated, while demand for products including the imageRUNNER ADVANCE DX C5800 mid-speed color MFD series were solid. As for inkjet printers, the number of unit sales decreased compared with the same period of the previous year as the surge in demand from users working from home subsided. As for laser printers, the number of unit sales decreased compared with the same period of the previous year, when supplies of products recovered, partly due to the curbing of corporate investments. Regarding equipment for the production printing market, the number of unit sales increased compared with the same period of the previous year, with the new strengthened product lineup of imagePRESS V series models strengthened by the addition of the imagePRESS V1350. As a result, sales of the Printing Business Unit increased by 5.1% year-on-year to ¥1,133.1 billion. Due to such effects as weak consumables sales, net income before tax for the first half of year decreased by 9.1% year-on-year to ¥114.7 billion.

Imaging Business Unit	Millions of yen (except percentage data)
	Six months ended  <br>June 30, 2023		Change			Six months ended  <br>June 30, 2022
Net sales:
Cameras		251,799		+10.3	%		228,270
Network cameras and Others		159,760		+23.3			129,578
External customers total		411,559		+15.0			357,848
Intersegment		102		-59.2			250
Total		411,661		+15.0			358,098
Operating cost and expenses		339,953		+8.8			312,370
Operating Profit		71,708		+56.8			45,728
Income before income taxes		72,473		+55.5			46,609

As for the Imaging Business Unit, Unit sales of the interchangeable-lens digital cameras, increased due to steady sales of the EOS R6 Mark II full-frame mirrorless camera, EOS R7 and EOS R10 APS-C size mirrorless cameras, released last year. The new entry-level EOS R50 and EOS R100 models, launched this year, were also well-received in the market. The market demand for some models even surpassed production capacity. Unit sales of lenses surpassed those of the same period of the previous year thanks to strong sales of RF-series interchangeable-lenses. Sales of network cameras increased thanks to strong demand and enhanced sales activity that leveraged the products’ expanding range of applications.

6

(2)	Operating Results and Financial Conditions (continued)

As a result, sales for the first half of the Imaging Business Unit increased by 15.0% year-on-year to ¥219.2 billion, while net income before tax for the first half increased by 55.5% compared with the same period of the previous year to ¥72.5 billion as a result of improved profitability due to an enhanced product mix that included new products and non-recurring expenses incurred to close a certain production facility in previous year.

Medical Business Unit	Millions of yen (except percentage data)
	Six months ended  <br>June 30, 2023		Change			Six months ended  <br>June 30, 2022
Net sales:
External customers total		256,628		+8.6	%		236,234
Intersegment		542		+177.9			195
Total		257,170		+8.8			236,429
Operating cost and expenses		245,874		+10.9			221,807
Operating Profit		11,296		-22.7			14,622
Income before income taxes		11,308		-24.7			15,020

As for the Medical Business Unit, while there was a drop-off following a period of increased demand last year in response to COVID-19, sales remained firm mainly in Europe. As a result, sales of the Medical Business Unit increased by 8.8% year-on-year to ¥257.2 billion. Net income before taxes for the first half decreased by 24.7% year-on-year to ¥11.3 billion due to an increase in personnel to strengthen sales.

Industrial Business Unit	Millions of yen (except percentage data)
	Six months ended  <br>June 30, 2023		Change			Six months ended  <br>June 30, 2022
Net sales:
Optical equipment		90,602		-9.3	%		99,916
Industrial equipment		40,251		-5.5			42,609
External customers total		130,853		-8.2			142,525
Intersegment		6,063		+43.8			4,217
Total		136,916		-6.7			146,742
Operating cost and expenses		117,414		-1.3			118,970
Operating Profit		19,502		-29.8			27,772
Income before income taxes		19,779		-31.0			28,672

As for the Industrial Business Unit, the number of semiconductor lithography equipment sold exceeded that of the same period of the previous year, supported by strengthened production capacity, and led by continued strong demand for power devices. For FPD lithography equipment, unit sales decreased compared with previous year due to reduced investments by panel manufacturers as the panel market worsened. As a result, net sales of the Industrial Business Unit decreased by 6.7% year-on-year to ¥136.9 billion, and net income before tax for the first half decreased by 31.0% year-on-year to ¥19.8 billion.

7

(2)	Operating Results and Financial Conditions (continued)

Financial Conditions

	Millions of yen (except percentage data)
	June 30, 2023			Change		December 31, 2022
Total assets		5,571,311			+475,781		5,095,530
Total liabilities		2,026,252			+279,752		1,746,500
Canon Inc. shareholders’ equity		3,301,352			+188,247		3,113,105
Noncontrolling interests		243,707			+7,782		235,925
Total equity		3,545,059			+196,029		3,349,030
Total liabilities and equity		5,571,311			+475,781		5,095,530
Canon Inc. shareholders’ equity as a percentage of total assets		59.3	%		-1.8		61.1	%

Total assets increased by ¥475.8 billion to ¥5,571.3 billion at June 30, 2023 compared to the end of the previous year, mainly due to the increase of cash and cash equivalents and inventories, combined with the impact of the depreciation of the yen. Inventories increased due to delays in delivery of some key parts and work in process inventory to prepare for the expected increase in production in the next quarter. Total liabilities increased by ¥279.8 billion to ¥2,026.3 billion at June 30, 2023 compared to the end of previous year, mainly due to the increase of short-term loans. The balance of total equity increased by ¥196.0 billion to ¥3,545.1 billion at June 30, 2023 compared to the end of previous year, mainly due to the accumulation of net income attributable to Canon Inc. and the increase of accumulated other comprehensive income resulting from the depreciation of the yen although the payment of dividends to Canon Inc. shareholders and the repurchases of treasury stock decreased total equity. As a result, Canon Inc. shareholders’ equity as a percentage of total assets declined by 1.8 points to 59.3% compared to the end of the previous year. However, Canon continuously has achieved its goal of developing a solid financial base, measured as equity as a percentage of total assets.

8

(2)	Operating Results and Financial Conditions (continued)

Cash Flows

	Millions of yen
	Six months ended  <br>June 30, 2023			Change		Six months ended  <br>June 30, 2022
Net cash provided by operating activities		154,057			+25,478		128,579
Net cash used in investing activities		(94,369	)		-10,974		(83,395	)
Free cash flow		59,688			+14,504		45,184
Net cash provided by (used in) financial activities		98,675			+121,184		(22,509	)
Effect of exchange rate changes on cash and cash equivalents		21,745			-8,507		30,252
Net change in cash and cash equivalents		180,108			+127,181		52,927
Cash and cash equivalents at beginning of period		362,101			-39,294		401,395
Cash and cash equivalents at end of period		542,209			+87,887		454,322

In the first half of the year, cash flow from operating activities increased by ¥25.5 billion year-on-year to ¥154.1 billion as a result of an increase in profit and working capital improvement, such as trade receivables. Cash flow used in investing activities increased by ¥11.0 billion to ¥94.4 billion from the same period of the previous fiscal year, when income temporarily increased due to the sales of an overseas branch office despite decrease in purchase of securities. Canon defines “free cash flow” as cash flows from operating activities less cash flows from investing activities. Free cash flow increased by ¥14.5 billion compared with the previous year to ¥59.7 billion.

Cash flow from financing activities increased by ¥121.2 billion year-on-year to ¥98.7 billion due to the increase in short-term loans despite increased dividend payouts of ¥3.4 billion and repurchases of ¥58.1 billion of treasury stock.

Owing to these factors, as well as the impact from foreign currency exchange adjustments, cash and cash equivalents increased by ¥180.1 billion to ¥542.2 billion from the end of the previous year.

9

(2)	Operating Results and Financial Conditions (continued)

Non-GAAP Financial Measures

Canon has reported its financial results in accordance with U.S. GAAP. In addition, Canon has discussed its results using “free cash flow,” which is a non-GAAP measure.

Canon believes this measure, which takes into consideration its operating and investing activities, is beneficial to an investor’s understanding of its current liquidity and the alternatives of uses in financing activities.

A reconciliation of this non-GAAP financial measure and the most directly comparable measure calculated and presented in accordance with U.S. GAAP is set forth on the following table.

	Billions of yen
	Six months ended<br>June 30, 2023
Net cash provided by operating activities		154.1
Net cash used in investing activities		(94.4	)
Free cash flow		59.7

10

(2)	Operating Results and Financial Conditions (continued)

Accounting Estimates and Assumptions

No material changes with respect to accounting estimates and assumptions have occurred during the six months ended June 30, 2023.

Prioritized Management Issues to be Addressed

No material changes or issues with respect to prioritized business operations and finances have occurred during the six months ended June 30, 2023.

Research and Development Expenses

Canon’s research and development expenses for the six months ended June 30, 2023 totalled ¥162.5 billion.

Property, Plant and Equipment

(1)	Major Property, Plant and Equipment

There were no significant additional plans for new construction or retirement of property, plant and equipment during the first half of 2023.

(2)	Prospect of Capital Investment in the first half of Fiscal 2023

The new construction of property, plant and equipment, which had been in progress as of December 31, 2022 and was completed during the first half of 2023, is as follows:

Name and location	Principal activities and products manufactured	Date of<br>completion
Canon Inc.,<br><br><br>Hiratsuka Plant<br><br><br>Kanagawa, Japan	New production base (Others and Corporate)	February<br><br><br>2023

There were no significant plans relevant to the retirement of property, plant and equipment.

(3)	Significant Business Contracts Entered into in the Second Quarter of Fiscal 2023

No material contracts were entered into during the three months ended June 30, 2023.

11

III.	Company Information
(1)	Shares
---	---

Total number of authorized shares is 3,000,000,000 shares. The common stock of Canon is listed on the Tokyo, Nagoya, Fukuoka, and Sapporo Stock Exchanges. Total issued shares are as follows:

	As of<br>June 30, 2023
Total number of issued shares		1,333,763,464

Stock Acquisition Rights

(1)	Stock options

The descriptions of the stock option plans as of June 30, 2023 are below.

The Stock Option Plan Approved on March 30, 2023

1. Grantees of share options

The Company’s 3 directors (excluding outside directors) and 32 executive officers.

2. Number of share options

The number of share options that the Board of Directors are authorized to issue is 840.

3. Number of shares acquired upon exercise of a share option

The number of shares acquired upon exercise of one share option (the “Allotted Number of Shares”) is 100 common shares, and the total number of shares to be delivered due to the exercise of share options is 84,000 common shares. However, in the case that the Company conducts a share split (including an allotment without consideration (musho-wariate) of shares of common stock of the Company; the same shall apply to all references to the share split herein) or share consolidation on and after the date of shareholders’ resolution adopting the proposal at the above-mentioned General Meeting of Shareholders (the “Allotment Date”), the number of shares acquired shall be adjusted in accordance with the following formula, rounding down any fraction of less than one share resulting from such adjustment.

Number of shares<br> <br><br><br><br>acquired after<br> <br><br><br><br>adjustment	=	Number of shares<br><br><br><br>acquired before<br> <br><br><br><br>adjustment	×	Ratio of share split<br><br><br><br>or share<br> <br><br><br><br>consolidation

In addition to the above, in any event that makes it necessary to adjust the number of shares acquired, including a merger and company split, on and after the Allotment Date, the Company may make appropriate adjustment to the number of shares acquired within a reasonable range.

4. Cash payment for share options (yen)

The cash payment required for each stock acquisition right shall be ¥1 per share to be acquired upon exercise of each stock acquisition right, multiplied by the number of shares acquired.

5. Period during which share options are exercisable

From April 29, 2023 to April 28, 2053

12

(1)	Shares (continued)

6. Issue price and amount of increased stated capital (yen)

The issue price and amount of increased stated capital per share is ¥2,800 and ¥1,400, respectively. The issue price is total amount of the exercise price of each stock acquisition (¥1 per share) and the fair value of the stock acquisition rights at the Allotment Date. The fair value of the stock acquisition rights shall be calculated by using the Black-Scholes Model based on some conditions to be applied on the Allotment Date. In addition, the amount of capital to be increased due to the issuance of shares upon exercise of the stock acquisition rights shall be a half of the maximum amount of capital increase, etc., which is calculated in accordance with Article 17, Paragraph 1 of the Company Accounting Regulations (KaishaKeisan Kisoku), and any fraction less than ¥1 arising therefrom shall be rounded up to the nearest ¥1.

7. Other conditions for exercise of share options

(i) Those to whom stock acquisition rights are allotted (the “Holder(s)”) shall be entitled to exercise all the stock acquisition rights together within 10 days (in case the last day is not a business day, the following business day) from the day immediately following the day when they cease to hold any position as a director or an executive officer of the Company.

(ii) In the event that the Company recognizes any violation of laws and regulations, misconduct of the duties, act conflicting with the duty of due care or duty of loyalty, or any other act equivalent thereto of the Holder, the Company may limit, subject to a resolution by the Board of Directors of the Company, the number of offered stock acquisition rights that may be exercised by such Holder.

8. Restriction on acquisition of share options by transfer

An acquisition of share options by way of transfer requires the approval of the Board of Directors.

9. Treatment of the stock acquisition rights upon restructuring transaction

If the Company conducts a merger (limited to the case where the Company is dissolved due to the merger), an absorption-type or incorporation-type company split (both, limited to the case where the Company becomes a split company), or a share exchange or transfer (both, limited to the case where the Company becomes a wholly-owned subsidiary) (collectively, the “Structural Reorganization”), the Company shall, in each of the above cases, allot stock acquisition rights of any of the relevant companies listed in “a” through “e” of Article 236, Paragraph 1, Item 8 of the Companies Act of Japan (the “Reorganized Company”) to the Holders holding the stock acquisition rights remaining at the time immediately preceding the effective date of the relevant Structural Reorganization (the “Remaining Stock Acquisition Rights”) (the effective date of the relevant Structural Reorganization shall mean, in the case of a merger, the date on which the merger becomes effective; in the case of a consolidation; the date of establishment of a newly-incorporated company through consolidation; in the case of an absorption-type company split, the date on which the absorption-type company split becomes effective; in the case of an incorporation-type company split, the date of establishment of a newly-incorporated company through the incorporation-type company split; in the case of a share exchange, the date on which the share exchange becomes effective; and in the case of a share transfer, the date of establishment of a wholly-owning parent company through the share transfer; hereinafter the same shall apply). Provided, however, that the foregoing shall be on the condition that transfer of such stock acquisition rights by the Reorganized Company in accordance with each of the following items is stipulated in a merger agreement, a company split agreement, a company split plan, a consolidation agreement, a share exchange agreement or a share transfer plan.

(i) Number of stock acquisition rights of the Reorganized Company to be allotted:

A number equal to the number of the Remaining Stock Acquisition Rights held by the Holder shall be transferred to such Holder.

(ii) Class of shares of the Reorganized Company to be acquired upon exercise of stock acquisition rights:

Common stock of the Reorganized Company.

(iii) Number of shares of the Reorganized Company to be acquired upon exercise of stock acquisition rights:

To be determined in accordance with 3 above, taking into consideration, among others, the conditions of Structural Reorganization.

13

(1)	Shares (continued)

(iv) Value of assets to be contributed upon exercise of each stock acquisition right:

The value of assets to be contributed upon exercise of each stock acquisition right to be allotted shall be the amount obtained by multiplying (x) the exercise price after reorganization set forth below by (y) the number of shares of the Reorganized Company to be acquired upon exercise of the relevant stock acquisition rights as determined in accordance with (iii) above. The “exercise price after reorganization” shall be one 1 yen per share of the Reorganized Company to be acquired upon exercise of each of its stock acquisition rights.

(v) Exercise period of stock acquisition rights:

From and including whichever is the later of (x) the commencement date of the period during which the stock acquisition rights may be exercised or (y) the effective date of the Structural Reorganization, to and including the expiration date of the period during which the stock acquisition rights may be exercised as provided.

(vi) Matters regarding stated capital and capital reserves increased due to the issuance of shares upon exercise of stock acquisition rights:

(a) The increased amount of stated capital to be increased due to the issuance of shares upon exercise of the stock acquisition rights will be one half (1/2) of the maximum amount of increase of stated capital, etc. to be calculated in accordance with Article 17, Paragraph 1 of the Company Accounting Regulations (Kaisha KeisanKisoku). Any fractional amount of less than one 1 yen resulting from such calculation will be rounded up to one 1 yen.

(b) The increased amount of capital reserves to be increased due to the issuance of shares upon exercise of the stock acquisition rights shall be the maximum amount of increases of stated capital, etc., mentioned in (a) above, after the subtraction of increased amount of stated capital mentioned in (a) above.

(vii) Restrictions on acquisition of stock acquisition rights by transfer:

The stock acquisition rights cannot be acquired through transfer, unless such acquisition is expressly approved by a resolution of the Board of Directors of the Reorganized Company.

(viii) Conditions for exercise of stock acquisition rights:

(a) Those to whom stock acquisition rights are allotted (the “Holder(s)”) shall be entitled to exercise all the stock acquisition rights together within 10 days (in case the last day is not a business day, the following business day) from the day immediately following the day when they cease to hold any position as a Director or an Executive Officer of the Company.

(b) In the event that the Company recognizes any violation of laws and regulations, misconduct of the duties, act conflicting with the duty of due care or duty of loyalty, or any other act equivalent thereto of the Holder, the Company may limit, subject to a resolution by the Board of Directors of the Company, the number of offered stock acquisition rights that may be exercised by such Holder.

(ix) Events regarding the Company’s acquisition of stock acquisition rights:

If a proposal for the approval of a merger agreement under which the Company will become a dissolved company, a proposal for the approval of a company split agreement or a company split plan under which the Company will become a split company or a proposal for the approval of a share exchange agreement or a share transfer plan under which the Company will become a wholly owned subsidiary is approved by the Company’s shareholders at a Meeting of Shareholders (or by the Board of Directors if no resolution of a Meeting of Shareholders is required for such approval), the Company will be entitled to acquire the stock acquisition rights, without compensation, on a date separately designated by the Board of Directors.

(2)	Other stock acquisition rights

Not applicable.

Exercise status of bonds with share subscription rights containing an adjustable exercise price clause

Not applicable.

14

(1)	Shares (continued)

Change in Issued Shares, Common Stock and Additional Paid in Capital

	Change during this quarter		As of June 30, 2023
Issued Shares (Number of shares)		—		1,333,763,464
Common Stock (Millions of yen)		—		174,762
Additional Paid-in Capital (Millions of yen)		—		306,288

Major Shareholders

	As of June 30, 2023
	Number of shares owned<br>(Number of shares)		Number of shares owned /<br>Number of shares issued
The Master Trust Bank of Japan, Ltd. (Trust Account)		176,492,500		17.66%
Custody Bank of Japan, Ltd. (Trust Account)		69,360,700		6.94%
Mizuho Bank, Ltd.		22,558,173		2.26%
SMBC Nikko Securities Inc.		22,420,209		2.24%
State Street Bank West Client – Treaty 505234		21,958,878		2.20%
The Dai-Ichi Life Insurance Company, Limited		16,695,780		1.67%
OBAYASHI CORPORATION		16,527,607		1.65%
Barclays Securities Japan Limited		14,796,800		1.48%
Moxley and Co. LLC		14,166,157		1.42%
Sompo Japan Insurance Inc.		13,080,087		1.31%
Total		388,056,891		38.84%

Notes:

1:	Apart from the above shares, The Dai-Ichi Life Insurance Company,<br>Limited held 6,180,000 shares contributed to a trust fund for its retirement and severance plans.
2:	Moxley and Co. LLC is a stockholder of a title deed of JPMorgan Chase Bank which is the Company’s trustee<br>bank of the American Depository Receipt.
---	---
3:	Apart from the above shares, the Company owns 334,635,475 shares (25.09% of total issued shares) of treasury<br>stock.
---	---

15

(1)	Shares (continued)

Voting Rights

	As of June 30, 2023
Classification	Number of shares<br>(shares)		Number of voting<br>rights (units)
Shares without voting rights		—		—
Shares with restricted voting rights (Treasury stock, etc.)		—		—
Shares with restricted voting rights (Others)		—		—
Shares with full voting rights (Treasury stock, etc.)		334,635,400		—
Shares with full voting rights (Others)		997,785,500		9,977,855
Fractional unit shares (Note)		1,342,564		—
Total number of issued shares		1,333,763,464		—
Total voting rights held by all shareholders		—		9,977,855

Note:

In “Fractional unit shares” under “Number of shares,” 75 shares of treasury stock are included.

Treasury Stock, etc.

	Number of shares owned<br>(Number of shares)		Number of shares owned /<br>Number of shares issued
Canon Inc.		334,635,400		25.09	%
Total		334,635,400		25.09	%

16

(2)	Directors and Executive Officers

There were no changes in Directors and Audit & Supervisory Board Members, and their functions between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2022 and the end of this quarter.

There were no changes in members of executive officers between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2022 and the end of this quarter.

Changes in functions of executive officers are below:

Takashi Takeya	(Managing Executive Officer: Senior General Manager of Global Logistics Management Center, Senior General Manager of Economic Security Office)
Hideki Sanatake	(Executive Officer: Group Executive of Corporate Intellectual Property and Legal Headquaters)

The Number of Directors and Executive Officers by Gender

Males: 48, Females: 2 (Females account for 4.0% of the total.)

The total number consisted of 10 Directors or Corporate Auditors and 40 Executive Officers as of June 30, 2023.

17

IV.	Financial Statements (Unaudited)
(1)	Consolidated Financial Statements
---	---

Index of Consolidated Financial Statements of Canon Inc. and Subsidiaries:

	Page
Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022		19
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the six<br>months ended June 30, 2023 and 2022		21
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income for the<br>three months ended June 30, 2023 and 2022		23
Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and<br>2022		25
Notes to Consolidated Financial Statements		26

18

CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

	Millions of yen
	June 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents (Notes 1, 17 and 18)		542,209			362,101
Short-term investments (Notes 2 and 17)		3,066			10,905
Trade receivables (Note 3)		612,535			636,803
Inventories (Note 4)		898,126			808,312
Current lease receivables (Note 6)		154,414			137,038
Prepaid expenses and other current assets (Notes 11, 13 and 17)		251,686			215,990
Allowance for credit losses (Notes 3 and 6)		(16,159	)		(15,235	)
Total current assets		2,445,877			2,155,914
Noncurrent receivables (Note 15)		11,634			12,996
Investments (Notes 2 and 17)		75,560			65,128
Property, plant and equipment, net (Note 5)		1,102,413			1,035,065
Operating lease<br>right-of-use assets (Note 14)		122,209			117,843
Intangible assets, net		275,520			280,995
Goodwill		1,008,250			972,626
Noncurrent lease receivables (Note 6)		328,976			279,332
Other assets		204,872			179,297
Allowance for credit losses (Note 6)		(4,000	)		(3,666	)
Total assets		5,571,311			5,095,530

19

CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited) (continued)

	Millions of yen
	June 30, 2023			December 31, 2022
Liabilities and equity
Current liabilities:
Short-term loans and current portion of long-term debt (Notes 8 and 16)		536,739			296,384
Short-term loans related to financial services		41,600			41,200
Other short-term loans and current portion of long-term debt		495,139			255,184
Trade payables (Note 7)		360,498			355,930
Accrued income taxes		47,656			48,414
Accrued expenses (Note 15)		347,766			365,847
Current operating lease liabilities (Note 14)		35,870			33,281
Other current liabilities (Notes 11, 13 and 17)		319,759			265,497
Total current liabilities		1,648,288			1,365,353
Long-term debt, excluding current portion of long-term debt (Note 16)		2,432			2,417
Accrued pension and severance cost		189,450			189,215
Noncurrent operating lease liabilities (Note 14)		87,798			85,331
Other noncurrent liabilities (Note 11)		98,284			104,184
Total liabilities		2,026,252			1,746,500
Equity:
Canon Inc. shareholders’ equity (Note 9):
Common stock		174,762			174,762
(Number of authorized shares)		(3,000,000,000	)		(3,000,000,000	)
(Number of issued shares)		(1,333,763,464	)		(1,333,763,464	)
Additional paid-in capital		405,036			404,838
Legal reserve		65,088			64,509
Retained earnings		3,724,997			3,664,735
Accumulated other comprehensive income (loss) (Note 10)		247,829			62,623
Treasury stock, at cost		(1,316,360	)		(1,258,362	)
(Number of shares)		(334,635,475	)		(318,250,096	)
Total Canon Inc. shareholders’ equity		3,301,352			3,113,105
Noncontrolling interests (Note 9)		243,707			235,925
Total equity (Note 9)		3,545,059			3,349,030
Total liabilities and equity		5,571,311			5,095,530

20

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited)

Consolidated Statements of Income

	Millions of yen
	Six months ended<br>June 30, 2023			Six months ended<br>June 30, 2022
Net sales (Notes 6, 10, 11 and 13):
Products and Equipment		1,574,577			1,497,082
Services		417,430			381,067
		1,992,007			1,878,149
Cost of sales (Notes 14 and 18):
Products and Equipment		855,490			840,119
Services		197,736			179,600
		1,053,226			1,019,719
Gross profit		938,781			858,430
Operating expenses:
Selling, general and administrative expenses (Notes 10, 14 and 18)		599,529			537,759
Research and development expenses		162,503			146,056
		762,032			683,815
Operating profit		176,749			174,615
Other income (deductions):
Interest and dividend income		5,553			1,625
Interest expense		(815	)		(530	)
Other, net (Notes 2, 10, 13 and 18)		7,175			(22,817	)
		11,913			(21,722	)
Income before income taxes		188,662			152,893
Income taxes		56,572			40,135
Consolidated net income		132,090			112,758
Less: Net income attributable to noncontrolling interests		10,277			7,758
Net income attributable to Canon Inc.		121,813			105,000
	Yen			Yen
Net income attributable to Canon Inc. shareholders per share (Note 12):
Basic		120.36			100.82
Diluted		120.31			100.79

21

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited) (continued)

Consolidated Statements of Comprehensive Income

	Millions of yen
	Six months ended<br>June 30, 2023			Six months ended<br>June 30, 2022
Consolidated net income		132,090			112,758
Other comprehensive income (loss), net of tax (Note 10):
Foreign currency translation adjustments		183,924			266,031
Net unrealized gains and losses on securities		39			—
Net gains and losses on derivative instruments		(462	)		(2,484	)
Pension liability adjustments		3,151			(735	)
		186,652			262,812
Comprehensive income (loss) (Note 9)		318,742			375,570
Less: Comprehensive income attributable to noncontrolling interests		11,723			8,792
Comprehensive income (loss) attributable to Canon Inc.		307,019			366,778

22

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited) (continued)

Consolidated Statements of Income

	Millions of yen
	Three months ended<br>June 30, 2023			Three months ended<br>June 30, 2022
Net sales (Notes 6, 10, 11 and 13):
Products and Equipment		810,397			801,171
Services		210,485			197,628
		1,020,882			998,799
Cost of sales (Notes 14 and 18):
Products and Equipment		437,646			442,488
Services		98,465			92,273
		536,111			534,761
Gross profit		484,771			464,038
Operating expenses:
Selling, general and administrative expenses (Notes 10, 14 and 18)		306,492			290,844
Research and development expenses		86,005			74,719
		392,497			365,563
Operating profit		92,274			98,475
Other income (deductions):
Interest and dividend income		3,158			1,017
Interest expense		(485	)		(296	)
Other, net (Notes 2, 10, 13 and 18)		6,181			(14,000	)
		8,854			(13,279	)
Income before income taxes		101,128			85,196
Income taxes		30,768			22,231
Consolidated net income		70,360			62,965
Less: Net income attributable to noncontrolling interests		4,957			3,940
Net income attributable to Canon Inc.		65,403			59,025
	Yen			Yen
Net income attributable to Canon Inc. shareholders per share (Note 12):
Basic		64.78			56.85
Diluted		64.75			56.83

23

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited) (continued)

Consolidated Statements of Comprehensive Income

	Millions of yen
	Three months ended<br>June 30, 2023			Three months ended<br>June 30, 2022
Consolidated net income		70,360			62,965
Other comprehensive income (loss), net of tax (Note 10):
Foreign currency translation adjustments		152,329			153,903
Net unrealized gains and losses on securities		15			—
Net gains and losses on derivative instruments		(758	)		(1,302	)
Pension liability adjustments		974			(461	)
		152,560			152,140
Comprehensive income (loss) (Note 9)		222,920			215,105
Less: Comprehensive income attributable to noncontrolling interests		6,285			4,042
Comprehensive income (loss) attributable to Canon Inc.		216,635			211,063

24

CANON INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

	Millions of yen
	Six months ended<br>June 30, 2023			Six months ended<br>June 30, 2022
Cash flows from operating activities:
Consolidated net income		132,090			112,758
Adjustments to reconcile consolidated net income to net cash provided by operating<br>activities:
Depreciation and amortization		111,196			111,102
Loss (gain) on disposal of fixed assets		2,488			(12,594	)
Deferred income taxes		(4,931	)		(4,023	)
Decrease in trade receivables		62,621			5,356
Increase in inventories		(38,614	)		(81,678	)
Increase in lease receivables (Note 6)		(30,563	)		(4,286	)
(Decrease) increase in trade payables		(6,116	)		52,265
Decrease in accrued income taxes		(2,341	)		(15,474	)
Decrease in accrued expenses		(40,608	)		(13,769	)
Decrease in accrued pension and severance cost		(15,175	)		(19,959	)
Other, net (Note 14)		(15,990	)		(1,119	)
Net cash provided by operating activities		154,057			128,579
Cash flows from investing activities:
Purchases of fixed assets (Note 5)		(90,685	)		(87,649	)
Proceeds from sale of fixed assets (Note 5)		2,208			14,197
Proceeds from maturity of held to maturity securities		—			2,151
Purchases of securities		(294	)		(10,774	)
Proceeds from sale and maturity of securities		8,735			1,628
Acquisitions of businesses, net of cash acquired		(14,525	)		(3,258	)
Other, net		192			310
Net cash used in investing activities		(94,369	)		(83,395	)
Cash flows from financing activities:
Repayments of long-term debt		(1,022	)		(914	)
Increase in short-term loans related to financial services, net (Note 8)		400			1,000
Increase in other short-term loans, net (Note 8)		234,219			87,859
Dividends paid		(60,931	)		(57,517	)
Repurchases and reissuance of treasury stock, net		(58,100	)		(50,008	)
Other, net		(15,891	)		(2,929	)
Net cash provided by (used in) financing activities		98,675			(22,509	)
Effect of exchange rate changes on cash and cash equivalents		21,745			30,252
Net change in cash and cash equivalents		180,108			52,927
Cash and cash equivalents at beginning of period		362,101			401,395
Cash and cash equivalents at end of period		542,209			454,322
Supplemental disclosure for cash flow information:
Cash paid during the period for:
Interest		783			492
Income taxes		60,490			63,054

25

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(1)	Basis of Presentation and Significant Accounting Policies
(a)	Basis of Presentation
---	---

The Company issued convertible debentures in the United States in May 1969 and established a program in which its American Depositary Receipts (ADRs) are traded in the U.S. over-the-counter market. Since then, under the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934, as amended, the Company has prepared its annual consolidated financial statements in accordance with U.S. GAAP and filed them with the U.S. Securities and Exchange Commission on Form 20-F. The Company’s ADRs were listed on the NYSE in September 2000 after being quoted on NASDAQ from February 1972 to September 2000. On February 24, 2023, the Company filed Form 25 with the SEC in connection with the delisting from the NYSE. The delisting became effective on March 6, 2023. In the future, the Company plans to file an application for the termination of registration of its ADRs with the SEC when the requirements have been met.

Canon’s quarterly consolidated financial statements are prepared in accordance with the recognition and measurement criteria of U.S. GAAP. Certain footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

Canon has reclassified certain items in the consolidated statements of cash flows for the six months ended June 30, 2022 to conform to the current year’s presentation.

The number of consolidated subsidiaries and affiliated companies that were accounted for by the equity method as of June 30, 2023 and December 31, 2022 are summarized as follows:

	June 30, 2023		December 31, 2022
Consolidated subsidiaries		332		330
Affiliated companies		10		10
Total		342		340
(b)	Principles of Consolidation
---	---

The quarterly consolidated financial statements include the accounts of the Company, its majority owned subsidiaries and those variable interest entities where the Company or its consolidated subsidiaries are the primary beneficiaries. All intercompany balances and transactions have been eliminated.

(c)	Recent Accounting Guidance

Recently adopted accounting guidance

In October 2021, ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”-ASC 805 (“Business Combinations”), was issued by the Financial Accounting Standards Board (“FASB”). The standard requires us to apply ASC 606 “Revenue from Contracts with Customers” to recognize and measure contract assets and contract liabilities acquired in a business combination. Canon adopted the standard from interim and annual reporting periods beginning January 1, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition.

In March 2022, ASU No. 2022-02, “Troubled Debt Restructurings and Vintage Disclosures”-ASC 326 (“Credit Losses”), was issued by FASB. The standard requires us to expand disclosures for certain loan re-financings and restructurings, and requires current-period gross write-offs by year of origination for financing receivables and net investments in leases. Canon adopted the standard from interim and annual reporting periods beginning January 1, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition.

26

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

In September 2022, ASU No. 2022-04, “Disclosure of Supplier Finance Program Obligations”-ASC 405-50 (“Liabilities - Supplier Finance Programs”), was issued by FASB. The standard requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. Canon adopted the standard, which requires disclosure of the key terms of the programs and information about obligations outstanding, from interim and annual reporting periods beginning January 1, 2023. The standard’s requirement to disclose a rollforward of obligations outstanding is effective for annual reporting periods beginning after December 15, 2023. The adoption of this standard did not have a material impact on its consolidated results of operations and financial condition. For further information, please refer to Note 7.

27

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(2)	Investments

The cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale debt securities included in short-term investments and investments by major security type at June 30, 2023 and December 31, 2022 are as follows:

	Millions of yen
	June 30, 2023
	Cost		Gross<br>unrealized<br>holding<br>gains		Gross<br>unrealized<br>holding<br>losses		Fair value
Current:
Corporate bonds		937		—		1		936
Noncurrent:
Corporate bonds		5,109		19		10		5,118
		6,046		19		11		6,054
	Millions of yen
	December 31, 2022
	Cost		Gross<br>unrealized<br>holding<br>gains		Gross<br>unrealized<br>holding<br>losses		Fair value
Current:
Corporate bonds		9,277		35		11		9,301
Noncurrent:
Corporate bonds		4,850		—		65		4,785
		14,127		35		76		14,086

Maturities of available-for-sale debt securities included in short-term investments and investments in the accompanying consolidated balance sheets at June 30, 2023 are as follows:

	Millions of yen
	Fair value
Due within one year		936
Due after one year through five years		5,118
Total		6,054

28

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

The unrealized and realized gains and losses related to equity securities for the six months and three months ended June 30, 2023 and 2022 are as follows:

	Millions of yen
	Six months ended<br>June 30, 2023		Six months ended<br>June 30, 2022
Net gains (losses) recognized during the period on equity securities		8,355		(5,232	)
Less: Net gains (losses) recognized during the period on equity securities sold during the<br>period		24		(9	)
Unrealized gains (losses) recognized during the period on equity securities still held at<br>June 30		8,331		(5,223	)
	Millions of yen
	Three months ended<br>June 30, 2023		Three months ended<br>June 30, 2022
Net gains (losses) recognized during the period on equity securities		4,814		(2,648	)
Less: Net gains (losses) recognized during the period on equity securities sold during the<br>period		18		(21	)
Unrealized gains (losses) recognized during the period on equity securities still held at<br>June 30		4,796		(2,627	)

The carrying amount of non-marketable equity securities without readily determinable fair value totaled ¥6,977 million and ¥6,808 million at June 30, 2023 and December 31, 2022, respectively. The impairment or other adjustments resulting from observable price changes recorded during the six months ended June 30, 2023 and 2022 were not material.

Time deposits with original maturities of more than three months are ¥2,130 million and ¥1,604 million at June 30, 2023 and December 31, 2022, respectively, and are included in short-term investments in the accompanying consolidated balance sheets.

29

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(3)	Trade Receivables

Trade receivables are summarized as follows:

	Millions of yen
	June 30, 2023			December 31, 2022
Notes		30,468			30,535
Accounts		582,067			606,268
Trade receivables		612,535			636,803
Allowance for credit losses		(14,112	)		(13,305	)
		598,423			623,498
(4)	Inventories
---	---

Inventories are summarized as follows: ****

	Millions of yen
	June 30, 2023		December 31, 2022
Finished goods		545,987		486,826
Work in process		277,289		253,026
Raw materials		74,850		68,460
		898,126		808,312
(5)	Property, Plant and Equipment, net
---	---

Property, plant and equipment are stated at cost less accumulated depreciation and are summarized as follows:

	Millions of yen
	June 30, 2023			December 31, 2022
Land		281,567			275,261
Buildings		1,843,465			1,760,058
Machinery and equipment		1,985,625			1,893,745
Construction in progress		50,031			60,914
Finance lease<br>right-of-use assets		7,591			7,315
Cost		4,168,279			3,997,293
Less: accumulated depreciation		(3,065,866	)		(2,962,228	)
Property, plant and equipment, net		1,102,413			1,035,065

Fixed assets presented in the consolidated statements of cash flows includes property, plant and equipment and intangible assets.

30

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(6)	Lessor Accounting

Lease income is included in products and equipment sales in the accompanying consolidated statements of income. Supplemental income statement information is as follows:

	Millions of yen
	Six months ended<br>June 30, 2023		Six months ended<br>June 30, 2022
Lease income – sales-type and direct financing leases
Revenue at lease commencement		75,573		50,970
Interest income on lease receivables		12,014		9,729
Sales-type and direct financing leases income total		87,587		60,699
Lease income – operating leases		19,471		15,459
Variable lease income		2,622		2,303
Total lease income		109,680		78,461
	Millions of yen
	Three months ended<br>June 30, 2023		Three months ended<br>June 30, 2022
Lease income – sales-type and direct financing leases
Revenue at lease commencement		39,028		29,919
Interest income on lease receivables		6,272		5,118
Sales-type and direct financing leases income total		45,300		35,037
Lease income – operating leases		10,154		8,122
Variable lease income		1,230		1,137
Total lease income		56,684		44,296

Allowance for Credit Losses

Lease receivables represent financing leases, which consist of sales-type leases and direct financing leases. These receivables typically have terms ranging from 1 year to 8 years. Lease receivables are ¥483,390 million and ¥416,370 million at June 30, 2023 and December 31, 2022, respectively.

The activities in the allowance for credit losses are as follows:

	Millions of yen
	Six months ended<br>June 30, 2023			Six months ended<br>June 30, 2022
Balance at beginning of period		5,596			3,791
Write-offs		(822	)		(1,182	)
Provision		553			1,006
Translation adjustments and other		720			1,126
Balance at end of period		6,047			4,741

31

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

Canon has policies in place to ensure that its products are sold to customers with an appropriate credit history, and continuously monitors its customers’ credit quality based on information including length of period in arrears, macroeconomic conditions, initiation of legal proceedings against customers and bankruptcy filings. The allowance for credit losses of lease receivables is evaluated collectively based on historical experiences of credit losses and reasonable and supportable forecasts. An additional reserve for individual accounts is recorded when Canon becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings. Lease receivables which are past due or individually evaluated for impairment at June 30, 2023 and December 31, 2022 are not significant.

Information about transferring lease receivables

Canon has syndication arrangements to sell its entire interests in lease receivables to the third-party financial institutions. The transactions under the arrangements are accounted for as sales in accordance with ASC 860 “Transfers and Servicing.” There were no significant transfers of lease receivables for the six months ended June 30, 2023 and 2022. The amount that remained uncollected was ¥8,560 million and ¥13,077 million at June 30, 2023 and December 31, 2022, respectively. Cash proceeds from the transactions are included in increase in lease receivables under the cash flow from operating activities in the consolidated statements of cash flows. Canon continues to provide collection and administrative services for the financial institutions. The amount associated with the servicing liability measured at fair value was not significant at June 30, 2023 and December 31, 2022. Canon also retains limited recourse obligations which cover credit defaults. The recourse obligations were not significant at June 30, 2023 and December 31, 2022.

(7)	Trade Payables

Trade payables are summarized as follows:

	Millions of yen
	June 30, 2023		December 31, 2022
Notes		84,785		82,702
Accounts		275,713		273,228
		360,498		355,930

Canon has supplier finance programs with particular third-party financial institutions where Canon agrees to pay the financial institutions after 90 to 180 days based on the contracts agreed to with the suppliers. The financial institutions offer earlier payment of the invoices at the sole discretion of the supplier for a discounted amount. Canon does not provide assets pledged as security or any other forms of guarantees under the arrangements. Canon is not a party to any arrangement between its suppliers and the financial institutions. The amount of liabilities under these programs, which is included in the above trade payables, as of June 30, 2023 and December 31, 2022 were ¥101,536 million and ¥95,389 million, respectively.

(8)	Short-Term Loans and Long-Term Debt

Short-term loans related to financial services are external loans held by Canon’s lease subsidiaries for the purpose of financing its customers through loans. Short-term loans related to financial services consisting of bank borrowings at June 30, 2023 and December 31, 2022 were ¥41,600 million and ¥41,200 million, and other short-term loans consisting of bank borrowings were ¥440,011 million and ¥200,012 million, respectively.

32

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

Canon has revolving credit facilities expiring in December 2023. The outstanding loans under the credit facilities are ¥54,000 million at a floating interest of 0.20% and Canon has no unused credit facilities as of June 30, 2023.

(9)	Equity

The changes in the carrying amounts of total equity, equity attributable to Canon Inc. shareholders and equity attributable to noncontrolling interests in the consolidated balance sheets for the six months ended June 30, 2023 and 2022 are as follows:

	Millions of yen
	Common<br>stock		Additional<br>paid-in<br>capital			Legal<br>reserve		Retained<br>earnings			Accumulated other<br>comprehensive<br>income (loss)			Treasury<br>stock			Total<br>Canon Inc.<br>shareholders’<br>equity			Non-<br>controlling<br>interests			Total<br>equity
Balance at December 31, 2022		174,762		404,838			64,509		3,664,735			62,623			(1,258,362	)		3,113,105			235,925			3,349,030
Equity transactions with noncontrolling interests and other				259														259			42			301
Dividends to Canon Inc. shareholders (60.00 yen per share)									(60,931	)								(60,931	)					(60,931	)
Dividends to noncontrolling interests																					(3,983	)		(3,983	)
Transfer to legal reserve							579		(579	)								—						—
Comprehensive income:
Net income									121,813									121,813			10,277			132,090
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments												182,307						182,307			1,617			183,924
Net unrealized gains and losses on securities												39						39						39
Net gains and losses on derivative instruments												(512	)					(512	)		50			(462	)
Pension liability adjustments												3,372						3,372			(221	)		3,151
Total comprehensive income (loss)																		307,019			11,723			318,742
Repurchases and reissuance of treasury stock				(61	)				(41	)					(57,998	)		(58,100	)					(58,100	)
Balance at June 30, 2023		174,762		405,036			65,088		3,724,997			247,829			(1,316,360	)		3,301,352			243,707			3,545,059
	Millions of yen
	Common<br>stock		Additional<br>paid-in<br>capital			Legal<br>reserve		Retained<br>earnings			Accumulated other<br>comprehensive<br>income (loss)			Treasury<br>stock			Total<br>Canon Inc.<br>shareholders’<br>equity			Non-<br>controlling<br>interests			Total<br>equity
Balance at December 31, 2021		174,762		403,119			68,015		3,538,037			(151,794	)		(1,158,366	)		2,873,773			224,656			3,098,429
Equity transactions with noncontrolling interests and other				303					(3	)								300			306			606
Dividends to Canon Inc. shareholders (55.00 yen per share)									(57,517	)								(57,517	)					(57,517	)
Dividends to noncontrolling interests																					(3,329	)		(3,329	)
Transfer to legal reserve				1,432			989		(2,421	)								—						—
Comprehensive income:
Net income									105,000									105,000			7,758			112,758
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments												265,043						265,043			988			266,031
Net unrealized gains and losses on securities												—						—						—
Net gains and losses on derivative instruments												(2,514	)					(2,514	)		30			(2,484	)
Pension liability adjustments												(751	)					(751	)		16			(735	)
Total comprehensive income (loss)																		366,778			8,792			375,570
Repurchases and reissuance of treasury stock				(11	)				(8	)					(49,989	)		(50,008	)					(50,008	)
Balance at June 30, 2022		174,762		404,843			69,004		3,583,088			109,984			(1,208,355	)		3,133,326			230,425			3,363,751

33

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(9)	Equity (continued)

The changes in the carrying amounts of total equity, equity attributable to Canon Inc. shareholders and equity attributable to noncontrolling interests in the consolidated balance sheets for the three months ended June 30, 2023 and 2022 are as follows:

	Millions of yen
	Common<br>stock		Additional<br>paid-in<br>capital			Legal<br>reserve		Retained<br>earnings			Accumulated other<br>comprehensive<br>income (loss)			Treasury<br>stock			Total<br>Canon Inc.<br>shareholders’<br>equity			Non-<br>controlling<br>interests			Total<br>equity
Balance at March 31, 2023		174,762		404,861			64,628		3,660,095			96,597			(1,258,364	)		3,142,579			238,102			3,380,681
Equity transactions with noncontrolling interests and other				236														236			32			268
Dividends to noncontrolling interests																					(712	)		(712	)
Transfer to legal reserve							460		(460	)								—						—
Comprehensive income:
Net income									65,403									65,403			4,957			70,360
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments												150,968						150,968			1,361			152,329
Net unrealized gains and losses on securities												15						15						15
Net gains and losses on derivative instruments												(814	)					(814	)		56			(758	)
Pension liability adjustments												1,063						1,063			(89	)		974
Total comprehensive income (loss)																		216,635			6,285			222,920
Repurchases and reissuance of treasury stock				(61	)				(41	)					(57,996	)		(58,098	)					(58,098	)
Balance at June 30, 2023		174,762		405,036			65,088		3,724,997			247,829			(1,316,360	)		3,301,352			243,707			3,545,059
	Millions of yen
	Common<br>stock		Additional<br>paid-in<br>capital			Legal<br>reserve		Retained<br>earnings			Accumulated other<br>comprehensive<br>income (loss)			Treasury<br>stock			Total<br>Canon Inc.<br>shareholders’<br>equity			Non-<br>controlling<br>interests			Total<br>equity
Balance at March 31, 2022		174,762		404,551			68,910		3,524,168			(42,054	)		(1,158,370	)		2,971,967			226,271			3,198,238
Equity transactions with noncontrolling interests and other				303					(3	)								300			306			606
Dividends to noncontrolling interests																					(194	)		(194	)
Transfer to legal reserve							94		(94	)								—						—
Comprehensive income:
Net income									59,025									59,025			3,940			62,965
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments												153,841						153,841			62			153,903
Net unrealized gains and losses on securities												—						—						—
Net gains and losses on derivative instruments												(1,336	)					(1,336	)		34			(1,302	)
Pension liability adjustments												(467	)					(467	)		6			(461	)
Total comprehensive income (loss)																		211,063			4,042			215,105
Repurchases and reissuance of treasury stock				(11	)				(8	)					(49,985	)		(50,004	)					(50,004	)
Balance at June 30, 2022		174,762		404,843			69,004		3,583,088			109,984			(1,208,355	)		3,133,326			230,425			3,363,751

34

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(10)	Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2023 and 2022 are as follows:

	Millions of yen
	Foreign<br>currency<br>translation<br>adjustments			Net<br>unrealized<br>gains and<br>losses on<br>securities			Gains and<br>losses on<br>derivative<br>instruments			Pension liability<br>adjustments			Total
Balance at December 31, 2022		191,287			(34	)		(428	)		(128,202	)		62,623
Other comprehensive income (loss) before reclassifications		182,320			69			(1,305	)		2,669			183,753
Amounts reclassified from accumulated other comprehensive income (loss)		(13	)		(30	)		793			703			1,453
Net change during the period		182,307			39			(512	)		3,372			185,206
Balance at June 30, 2023		373,594			5			(940	)		(124,830	)		247,829
	Millions of yen
	Foreign<br>currency<br>translation<br>adjustments			Net<br>unrealized<br>gains and<br>losses on<br>securities			Gains and<br>losses on<br>derivative<br>instruments			Pension liability<br>adjustments			Total
Balance at December 31, 2021		5,519			—			(894	)		(156,419	)		(151,794	)
Other comprehensive income (loss) before reclassifications		265,043			—			(4,889	)		(1,837	)		258,317
Amounts reclassified from accumulated other comprehensive income (loss)		—			—			2,375			1,086			3,461
Net change during the period		265,043			—			(2,514	)		(751	)		261,778
Balance at June 30, 2022		270,562			—			(3,408	)		(157,170	)		109,984

35

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(10)	Other Comprehensive Income (Loss) (continued)

Reclassifications out of accumulated other comprehensive income (loss) for the six months ended June 30, 2023 and 2022 are as follows:

	Millions of yen
	Amount reclassified from accumulated other comprehensive income (loss)*
	Six months ended  <br>June 30, 2023			Six months ended  <br>June 30, 2022			Affected line items in consolidated statements of<br>income
Foreign currency translation adjustments
		(32	)		—		Selling, general and administrative expenses
		10			—		Income taxes
		(22	)		—		Consolidated net income
		9			—		Net income attributable to noncontrolling interests
		(13	)		—		Net income attributable to Canon Inc.
Net unrealized gains and losses on securities		(38	)		—		Other, net
		8			—		Income taxes
		(30	)		—		Consolidated net income
		—			—		Net income attributable to noncontrolling interests
		(30	)		—		Net income attributable to Canon Inc.
Gains and losses on derivative instruments		1,127			3,273		Net sales
		(316	)		(914	)	Income taxes
		811			2,359		Consolidated net income
		(18	)		16		Net income attributable to noncontrolling interests
		793			2,375		Net income attributable to Canon Inc.
Pension liability adjustments		571			1,640		Other, net
		(14	)		(301	)	Income taxes
		557			1,339		Consolidated net income
		146			(253	)	Net income attributable to noncontrolling interests
		703			1,086		Net income attributable to Canon Inc.
Total amount reclassified, net of tax and noncontrolling interests		1,453			3,461

* Increase (decrease) of amounts indicate losses (gains) in consolidated statements of income.

36

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(10)	Other Comprehensive Income (Loss) (continued)

Reclassifications out of accumulated other comprehensive income (loss) for the three months ended June 30, 2023 and 2022 are as follows:

	Millions of yen
	Amount reclassified from accumulated other comprehensive income (loss)*
	Three months ended<br>June 30, 2023			Three months ended<br>June 30, 2022			Affected line items in consolidated statements of<br>income
Net unrealized gains and losses on securities		(12	)		—		Other, net
		3			—		Income taxes
		(9	)		—		Consolidated net income
		—			—		Net income attributable to noncontrolling interests
		(9	)		—		Net income attributable to Canon Inc.
Gains and losses on derivative instruments		219			2,129		Net sales
		(61	)		(603	)	Income taxes
		158			1,526		Consolidated net income
		(12	)		6		Net income attributable to noncontrolling interests
		146			1,532		Net income attributable to Canon Inc.
Pension liability adjustments		335			757		Other, net
		(18	)		(138	)	Income taxes
		317			619		Consolidated net income
		74			(127	)	Net income attributable to noncontrolling interests
		391			492		Net income attributable to Canon Inc.
Total amount reclassified, net of tax and noncontrolling interests		528			2,024

* Increase (decrease) of amounts indicate losses (gains) in consolidated statements of income.

37

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(11)	Revenue

Canon recognizes contract assets primarily for unbilled receivables mainly arising from services contracts for the products of the Printing Business Unit. Contract assets are reclassified to trade receivables when they are billed under the terms of the contract. The difference between the opening and closing balances of contract assets primarily results from the timing difference of Canon’s performance and billing to customers. Contract assets at June 30, 2023 and December 31, 2022 were ¥51,426 million and ¥39,251 million respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheets.

Canon typically bills to the customer when the performance obligation is satisfied and collects the payment in relatively short term except for certain maintenance service of the products of the Printing Business Unit and the Medical Business Unit and certain industrial equipment for which Canon occasionally receives the payment in advance from customers. The amount received in excess of revenue recognized is recorded as deferred revenue until the performance obligation for distinct goods or services are satisfied. Deferred revenue at June 30, 2023 and December 31, 2022 was ¥147,194 million and ¥141,840 million, respectively, and are included in other current liabilities and other non-current liabilities in the accompanying consolidated balance sheets. Revenue recognized for the six months ended June 30, 2023, which had been included in the deferred revenue balance at December 31, 2022, was ¥76,501 million.

Remaining performance obligations for products and equipment at June 30, 2023 primarily arise from the sales of certain industrial equipment, amounting to ¥158,675 million, 68% of which is expected to be recognized as revenue within one year, 31% is within two years and the remaining 1% is within three years. Disclosure of remaining performance obligations is not required for the majority of service since the related revenue is recognized on an as billed basis applying the right to invoice practical expedient or is generated from the contracts with original expected duration of less than one year. Service revenue recognized from the fixed maintenance service contracts for the products of the Printing Business Unit and the Medical Business Unit with original expected duration of more than one year is ¥55,503 million for the six months ended June 30, 2023 and the average remaining period for these fixed contracts at June 30, 2023 is about two years.

Disaggregated revenues by business unit, product and geographic area are described in Note 19.

38

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(12)	Net Income Attributable to Canon Inc. Shareholders per Share

Reconciliations of the numerators and denominators of basic and diluted net income attributable to Canon Inc. shareholders per share computations for the six months ended June 30, 2023 and 2022 are as follows:

	Millions of yen
	Six months ended  <br>June 30, 2023		Six months ended  <br>June 30, 2022
Net income attributable to Canon Inc.		121,813		105,000
Diluted net income attributable to Canon Inc.		121,810		104,998
	Number of shares
---	---	---	---	---
	Six months ended  <br>June 30, 2023		Six months ended  <br>June 30, 2022
The weighted-average number of common shares outstanding		1,012,060,811		1,041,442,593
Effect of dilutive securities:
Stock options		390,110		319,259
Diluted common shares outstanding		1,012,450,921		1,041,761,852
	Yen
---	---	---	---	---
	Six months ended  <br>June 30, 2023		Six months ended  <br>June 30, 2022
Net income attributable to Canon Inc. shareholders per share:
Basic		120.36		100.82
Diluted		120.31		100.79

Reconciliations of the numerators and denominators of basic and diluted net income attributable to Canon Inc. shareholders per share computations for the three months ended June 30, 2023 and 2022 are as follows:

	Millions of yen
	Three months ended<br>June 30, 2023		Three months ended<br>June 30, 2022
Net income attributable to Canon Inc.		65,403		59,025
Diluted net income attributable to Canon Inc.		65,402		59,024
	Number of shares
	Three months ended<br>June 30, 2023		Three months ended<br>June 30, 2022
The weighted-average number of common shares outstanding		1,009,577,175		1,038,301,669
Effect of dilutive securities:
Stock options		426,639		352,121
Diluted common shares outstanding		1,010,003,814		1,038,653,790
	Yen
---	---	---	---	---
	Three months ended<br>June 30, 2023		Three months ended<br>June 30, 2022
Net income attributable to Canon Inc. shareholders per share:
Basic		64.78		56.85
Diluted		64.75		56.83

During the six and three months ended June 30, 2023 and 2022, there were dilutive effects from the stock options granted by the Company.

39

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(13)	Derivatives and Hedging Activities

Risk management policy

Canon operates internationally, exposing it to the risk of changes in foreign currency exchange rates. Derivative financial instruments are comprised principally of foreign exchange contracts utilized by the Company and certain of its subsidiaries to reduce the risk. Canon assesses foreign currency exchange rate risk by continually monitoring changes in the exposures and by evaluating hedging opportunities. Canon does not hold or issue derivative financial instruments for speculative purposes. Canon is also exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments, but it is not expected that any counterparties will fail to meet their obligations. Most of the counterparties are internationally recognized financial institutions and selected by Canon taking into account their financial condition, and contracts are diversified across a number of major financial institutions.

Foreign currency exchange raterisk management

Canon’s international operations expose Canon to the risk of changes in foreign currency exchange rates. Canon uses foreign exchange contracts to manage certain foreign currency exchange exposures principally from the exchange of U.S. dollars and euros into yen. These contracts are primarily used to hedge the foreign currency exposure of forecasted intercompany sales and intercompany trade receivables that are denominated in foreign currencies. In accordance with Canon’s policy, a specific portion of foreign currency exposure resulting from forecasted intercompany sales is hedged using foreign exchange contracts which principally mature within three months.

Cash flow hedge

Changes in the fair value of derivative financial instruments designated as cash flow hedges, including foreign exchange contracts associated with forecasted intercompany sales, are reported in accumulated other comprehensive income (loss). These amounts are subsequently reclassified into earnings in the same period as the hedged items affect earnings. All amounts recorded in accumulated other comprehensive income (loss) as of June 30, 2023 are expected to be recognized in net sales over the next twelve months. Changes in the fair value of a foreign exchange contract for the period between the date that the forecasted intercompany sales occur and its maturity date are recognized in earnings.

Derivatives not designated as hedges

Canon has entered into certain foreign exchange contracts to primarily offset the earnings impact related to fluctuations in foreign currency exchange rates associated with certain assets denominated in foreign currencies. Although these foreign exchange contracts have not been designated as hedges as required in order to apply hedge accounting, the contracts are effective from an economic perspective. The changes in the fair value of these contracts are recorded in earnings immediately.

40

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(13)	Derivatives and Hedging Activities (continued)

Contract amounts of foreign exchange contracts at June 30, 2023 and December 31, 2022 are set forth below:

	Millions of yen
	June 30, 2023		December 31, 2022
To sell foreign currencies		172,472		149,080
To buy foreign currencies		28,827		26,224

Fair value of derivative instruments in the consolidated balance sheets

The following tables present Canon’s derivative instruments measured at gross fair value as reflected in the consolidated balance sheets at June 30, 2023 and December 31, 2022.

Derivatives designated as hedging instruments

	Millions of yen
	Balance sheet location	Fair value
		June 30, 2023		December 31, 2022
Assets:
Foreign exchange contracts	Prepaid expenses and other current assets		200		176
Liabilities:
Foreign exchange contracts	Other current liabilities		845		416

Derivatives not designated as hedging instruments

	Millions of yen
	Balance sheet location	Fair value
		June 30, 2023		December 31, 2022
Assets:
Foreign exchange contracts	Prepaid expenses and other current assets		271		2,539
Liabilities:
Foreign exchange contracts	Other current liabilities		5,880		846

41

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(13)	Derivatives and Hedging Activities (continued)

Effect of derivative instruments in the consolidated statements of income

The following tables present the effect of Canon’s derivative instruments in the consolidated statements of income for the six and three months ended June 30, 2023 and 2022.

Derivatives in cash flow hedging relationships

	Millions of yen
Six months ended June 30, 2023	Gain (loss)<br>recognized in<br>OCI			Gain (loss) reclassified from<br>accumulated OCI into income
	Amount			Location		Amount
Foreign exchange contracts		(1,825	)		Net sales		(1,127	)
	Millions of yen
Six months ended June 30, 2022	Gain (loss)<br>recognized in<br>OCI			Gain (loss) reclassified from<br>accumulated OCI into income
	Amount			Location		Amount
Foreign exchange contracts		(6,758	)		Net sales		(3,273	)
	Millions of yen
Three months ended June 30, 2023	Gain (loss)<br>recognized in<br>OCI			Gain (loss) reclassified from<br>accumulated OCI into income
	Amount			Location		Amount
Foreign exchange contracts		(1,318	)		Net sales		(219	)
	Millions of yen
Three months ended June 30, 2022	Gain (loss)<br>recognized in<br>OCI			Gain (loss) reclassified from<br>accumulated OCI into income
	Amount			Location		Amount
Foreign exchange contracts		(3,922	)		Net sales		(2,129	)

42

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(13)	Derivatives and Hedging Activities (continued)

Effect of derivative instruments in the consolidated statements of income (continued)

Derivatives not designated as hedging instruments

	Millions of yen
Six months ended June 30, 2023	Gain (loss) recognized<br>in income on derivative
	Location		Amount
Foreign exchange contracts		Other, net		(13,009	)
	Millions of yen
Six months ended June 30, 2022	Gain (loss) recognized<br>in income on derivative
	Location		Amount
Foreign exchange contracts		Other, net		(13,683	)
	Millions of yen
Three months ended June 30, 2023	Gain (loss) recognized<br>in income on derivative
	Location		Amount
Foreign exchange contracts		Other, net		(10,755	)
	Millions of yen
Three months ended June 30, 2022	Gain (loss) recognized<br>in income on derivative
	Location		Amount
Foreign exchange contracts		Other, net		(7,758	)

43

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(14)	Lessee Accounting

Lease costs are included in cost of sales or selling general and administrative expense in the accompanying consolidated statements of income. Supplemental income statement information is as follows:

	Millions of yen
	Six months ended<br>June 30, 2023		Six months ended<br>June 30, 2022
Operating lease cost		23,389		22,474
Short-term lease cost		8,108		7,027
Other lease cost		158		57
Total		31,655		29,558
	Millions of yen
	Three months ended<br>June 30, 2023		Three months ended<br>June 30, 2022
Operating lease cost		11,816		11,378
Short-term lease cost		4,136		3,457
Other lease cost		92		9
Total		16,044		14,844

Operating lease cash flow

Supplemental cash flow information is as follows.

	Millions of yen
	Six months ended  <br>June 30, 2023		Six months ended  <br>June 30, 2022
Cash paid for amount included in the measurement of lease liabilities
Operating cash flows from operating leases		22,582		22,604
Noncash activity - Rights of use assets obtained in exchange for lease liabilities
Operating leases		18,724		24,382

Maturity Analysis

The following is a schedule by year of the future minimum lease payments under operating leases at June 30, 2023.

	Millions of yen
Within one year		38,032
Two years		28,440
Three years		21,937
Four years		15,211
Five years		9,435
Thereafter		17,561
Total future minimum lease payments		130,616
Less Imputed Interest		(6,948	)
Total		123,668

44

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(15)	Commitments and Contingent Liabilities

Commitments

As of June 30, 2023, commitments outstanding for the purchase of property, plant and equipment approximated ¥59,437 million, and commitments outstanding for the purchase of parts and raw materials approximated ¥251,095 million.

Guarantees

Canon occupies sales offices and other facilities under lease arrangements accounted for as operating leases. Deposits mainly for restoration made under such arrangements aggregated to ¥10,404 million and ¥10,086 million at June 30, 2023 and December 31, 2022, respectively, and are included in noncurrent receivables in the accompanying consolidated balance sheets.

Canon provides guarantees for its employees, affiliates and other companies. The guarantees for the employees are principally made for their housing loans. The guarantees for affiliates and other companies are made for their lease obligations and bank loans to facilitate financing.

Canon would have to perform under a guarantee if the borrower defaults on a payment within the contract terms. The contract terms are 1 year to 11 years in case of employees with housing loans, and 1 year to 6 years in case of affiliates and other companies with lease obligations and bank loans. The maximum amount of undiscounted payments Canon would have had to make in the event of default is ¥1,665 million at June 30, 2023. The carrying amounts of the liabilities recognized for Canon’s obligations as a guarantor under those guarantees at June 30, 2023 were not significant.

Canon also offers assurance-type warranties under which it generally guarantees the performance of products delivered and services rendered for a certain period or term. Estimated product warranty costs are recorded at the time revenue is recognized and are included in selling, general and administrative expenses in the accompanying consolidated statements of income. Estimates for accrued product warranty costs are based on historical experience. Accrued product warranty costs are included in accrued expenses in the accompanying consolidated balance sheets and changes in accrued product warranty cost for the six months ended June 30, 2023 and 2022 are summarized as follows:

Six months ended June 30, 2023

	Millions of yen
Balance at December 31, 2022		20,887
Addition		11,179
Utilization		(11,050	)
Other		(517	)
Balance at June 30, 2023		20,499

Six months ended June 30, 2022

	Millions of yen
Balance at December 31, 2021		16,949
Addition		11,162
Utilization		(9,317	)
Other		7
Balance at June 30, 2022		18,801

45

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(15)	Commitments and Contingent Liabilities (continued)

Legal proceedings

Canon is involved in various claims and legal actions arising in the ordinary course of business. Canon has recorded provisions for liabilities when it is probable that liabilities have been incurred and the amount of loss can be reasonably estimated. Canon reviews these provisions at least quarterly and adjusts these provisions to reflect the impact of the negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Based on its experience, although litigation is inherently unpredictable, Canon believes that any damage amounts claimed in outstanding matters are not a meaningful indicator of Canon’s potential liability. In the opinion of management, any reasonably possible range of losses from outstanding matters would not have a material adverse effect on Canon’s consolidated financial position, results of operations, or cash flows.

(16)	Disclosures about the Fair Value of Financial Instruments and Concentrations of Credit Risk<br>

Fair value of financial instruments

The estimated fair values of Canon’s financial instruments at June 30, 2023 and December 31, 2022 are set forth below. The following summary excludes cash and cash equivalents, trade receivables, noncurrent receivables, short-term loans, trade payables and accrued expenses, and the fair values of these instruments approximate their carrying amounts. The summary also excludes investments and derivative instruments which are disclosed in Note 2 and Note 17, and Note 13, respectively.

	Millions of yen
	June 30, 2023						December 31, 2022
	Carrying<br>amount			Estimated<br>fair value			Carrying<br>amount			Estimated<br>fair value
Long-term debt, including current portion of long-term debt		(54,197	)		(54,197	)		(54,205	)		(54,205	)

The following methods and assumptions are used to estimate the fair value in the above table.

Long-term debt

Canon’s long-term debt instruments are classified as Level 2 instruments and valued based on the present value of future cash flows associated with each instrument discounted using current market borrowing rates for similar debt instruments of comparable maturity. The levels are more fully described in Note 17.

Limitations of fair value estimates

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Concentrations of credit risk

No single customer accounted for more than 10 percent of consolidated trade receivables as of June 31, 2023 and December 31, 2022.

46

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(17)	Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is as follows:

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<br>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 about the assumptions that market participants<br>would use in establishing a price.

Assets and liabilities measured at fair value on a recurring basis

The following tables present Canon’s assets and liabilities that are measured at fair value on a recurring basis consistent with the fair value hierarchy at June 30, 2023 and December 31, 2022.

	Millions of yen
	June 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents		—		500		—		500
Short-term investments:
Available-for-sale:
Corporate bonds		—		936		—		936
Investments:
Available-for-sale:
Corporate bonds		—		5,118		—		5,118
Fund trusts and others		284		470		—		754
Equity securities		30,270		—		—		30,270
Prepaid expenses and other current assets:
Derivatives		—		471		—		471
Total assets		30,554		7,495		—		38,049
Liabilities:
Other current liabilities:
Derivatives		—		6,725		—		6,725
Total liabilities		—		6,725		—		6,725

47

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(17)	Fair Value Measurements (continued)
	Millions of yen
---	---	---	---	---	---	---	---	---
	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents		—		627		—		627
Short-term investments:
Available-for-sale:
Corporate bonds		—		9,301		—		9,301
Investments:
Available-for-sale:
Corporate bonds		—		4,785		—		4,785
Fund trusts and others		255		383		—		638
Equity securities		21,770		—		—		21,770
Prepaid expenses and other current assets:
Derivatives		—		2,715		—		2,715
Total assets		22,025		17,811		—		39,836
Liabilities:
Other current liabilities:
Derivatives		—		1,262		—		1,262
Total liabilities		—		1,262		—		1,262

Level 1 investments are comprised principally of Japanese equity securities, which are valued using an unadjusted quoted market price in active markets with sufficient volume and frequency of transactions. Level 2 assets and liabilities are comprised principally of corporate bonds included in cash and cash equivalents, investments or short-term investments, and derivatives. Corporate bonds included in cash and cash equivalents, and investments or short-term investments are valued using quoted prices for identical assets in markets that are not active or quotes obtained from counterparties or third parties.

Derivative financial instruments are comprised of foreign exchange contracts. Level 2 derivatives are valued using quotes obtained from counterparties or third parties, which are periodically validated by pricing models using observable market inputs, such as foreign currency exchange rates and interest rates, based on market approach.

Assets and liabilities measured at fair value on a nonrecurring basis

During the six months ended June 30, 2023 and 2022, there were no circumstances that required any significant assets or liabilities to be measured at fair value on a nonrecurring basis.

48

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(18)	Supplemental Information

Foreign Currency Exchange Gains and Losses

Gains and losses resulting from foreign currency transactions, including foreign exchange contracts, and translation of assets and liabilities denominated in foreign currencies are included in other, net of other income (deductions) in the consolidated statements of income. Foreign currency exchange gains and losses were a net loss of ¥13,831 million and ¥37,072 million for the six months ended June 30, 2023 and 2022, respectively, and were a net loss of ¥6,081 million and ¥23,064 million for the three months ended June 30, 2023 and 2022, respectively.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expenses were ¥20,797 million and ¥18,068 million for the six months ended June 30, 2023 and 2022, respectively, and were ¥11,752 million and ¥9,989 million for the three months ended June 30, 2023 and 2022, respectively, and are included in selling, general and administrative expenses in the consolidated statements of income.

Shipping and Handling Costs

Shipping and handling costs totalled ¥31,372 million and ¥27,859 million for the six months ended June 30, 2023 and 2022, respectively, and were ¥15,243 million and ¥14,929 million for the three months ended June 30, 2023 and 2022, respectively, and are included in selling, general and administrative expenses in the consolidated statements of income.

Components of Net Periodic Benefit Cost

Net periodic benefit cost for Canon’s employee retirement and severance defined benefit plans for the six months ended June 30, 2023 and 2022 consisted of the following components:

	Millions of yen
	Six months ended   <br>June 30, 2023			Six months ended   <br>June 30, 2022
Service cost		13,251			15,868
Interest cost		11,399			6,302
Expected return on plan assets		(17,838	)		(19,886	)
Amortization of prior service credit		(3,887	)		(4,117	)
Amortization of actuarial loss		4,458			5,741
Curtailments and settlements		—			(637	)
		7,383			3,271

49

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(18)	Supplemental Information (continued)

Net periodic benefit cost for Canon’s employee retirement and severance defined benefit plans for the three months ended June 30, 2023 and 2022 consisted of the following components:

	Millions of yen
	Three months ended<br>June 30, 2023			Three months ended<br>June 30, 2022
Service cost		6,681			7,824
Interest cost		5,810			3,220
Expected return on plan assets		(9,047	)		(10,069	)
Amortization of prior service credit		(1,948	)		(2,066	)
Amortization of actuarial loss		2,283			2,807
Curtailments and settlements		—			(637	)
		3,779			1,079

Service cost component of net periodic benefit cost for Canon’s employee retirement and severance defined benefit plans is included in cost of sales and operating expenses in the consolidated statements of income. The components other than the service cost component are included in other, net of other income (deductions) in the consolidated statements of income.

Cash Equivalents

Certain debt securities with original maturities of less than three months, classified as available-for-sale debt securities of ¥500 million and ¥627 million at June 30, 2023 and December 31, 2022, respectively, are included in cash and cash equivalents in the consolidated balance sheets. Fair value for these securities approximates their cost.

50

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(19)	Segment Information

Canon reports in four reportable segments: the Printing Business Unit, the Imaging Business Unit, the Medical Business Unit and the Industrial Business Unit with Others and Corporate, which are based on the organizational structure and information reviewed by Canon’s management to evaluate results and allocate resources.

Based on the realignment of Canon’s internal management structure, from the fourth quarter ended December 31, 2022, Canon has changed the name and structure of segments from Industrial and Others Business Unit and Corporate and eliminations to Industrial Business Unit, Others and Corporate and Eliminations. Also, a certain business, which was previously included in Others, has been presented within the Printing Business Unit from the beginning of the first quarter of 2023. Operating results for the three and six months ended June 30, 2022 have also been reclassified.

The primary products included in each segment are as follows:

Printing Business Unit:	Office multifunction devices (MFDs) / Document solutions/<br><br><br>Laser multifunction printers (MFPs) / Laser printers / Inkjet printers /<br><br><br>Image scanners / Calculators / Digital continuous feed presses /<br><br><br>Digital sheet-fed presses / Large format printers
Imaging Business Unit:	Interchangeable-lens digital cameras / Interchangeable lenses /<br><br><br>Digital compact cameras / Compact photo printers / MR Systems /<br><br><br>Network cameras / Video management software / Video<br> <br>content<br>analytics software / Digital camcorders / Digital cinema cameras /<br> <br>Broadcast equipment / Projectors
Medical Business Unit:	Computed tomography (CT) systems / Diagnostic ultrasound systems /<br><br><br>Diagnostic X-ray systems / Magnetic resonance imaging (MRI) systems /<br><br><br>Clinical chemistry analyzers / Digital radiography systems /<br><br><br>Ophthalmic equipment
Industrial Business Unit:	Semiconductor lithography equipment / FPD (Flat panel display)<br><br><br>lithography equipment / OLED Display Manufacturing Equipment /<br><br><br>Vacuum thin-film deposition equipment / Die bonders
Others:	Handy terminals / Document scanners

The accounting policies of the segments are substantially the same as the accounting policies used in Canon’s quarterly consolidated financial statements. Canon evaluates performance of, and allocates resources to, each segment based on income before income taxes.

51

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(19)	Segment Information (continued)

Information about operating results for each segment for the six months ended June 30, 2023 and 2022 is as follows:

	Millions of yen
	Printing		Imaging		Medical		Industrial		Others<br>and<br>Corporate			Eliminations			Consolidated
2023:
Net sales:
External customers		1,130,118		411,559		256,628		130,853		62,849			—			1,992,007
Intersegment		2,966		102		542		6,063		33,766			(43,439	)		—
Total		1,133,084		411,661		257,170		136,916		96,615			(43,439	)		1,992,007
Operating cost and expenses		1,023,172		339,953		245,874		117,414		131,120			(42,275	)		1,815,258
Operating profit		109,912		71,708		11,296		19,502		(34,505	)		(1,164	)		176,749
Other income (deductions)		4,814		765		12		277		11,597			(5,552	)		11,913
Income before income taxes		114,726		72,473		11,308		19,779		(22,908	)		(6,716	)		188,662
	Millions of yen
	Printing		Imaging		Medical		Industrial		Others<br>and<br>Corporate			Eliminations			Consolidated
2022:
Net sales:
External customers		1,075,190		357,848		236,234		142,525		66,352			—			1,878,149
Intersegment		2,475		250		195		4,217		36,960			(44,097	)		—
Total		1,077,665		358,098		236,429		146,742		103,312			(44,097	)		1,878,149
Operating cost and expenses		958,150		312,370		221,807		118,970		136,505			(44,268	)		1,703,534
Operating profit		119,515		45,728		14,622		27,772		(33,193	)		171			174,615
Other income (deductions)		6,760		881		398		900		(24,739	)		(5,922	)		(21,722	)
Income before income taxes		126,275		46,609		15,020		28,672		(57,932	)		(5,751	)		152,893

52

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(19)	Segment Information (continued)

Information about operating results for each segment for the three months ended June 30, 2023 and 2022 is as follows:

	Millions of yen
	Printing		Imaging		Medical			Industrial		Others<br>and<br>Corporate			Eliminations			Consolidated
2023:
Net sales:
External customers		573,414		219,200		125,771			72,474		30,023			—			1,020,882
Intersegment		1,517		38		344			2,381		16,152			(20,432	)		—
Total		574,931		219,238		126,115			74,855		46,175			(20,432	)		1,020,882
Operating cost and expenses		515,637		184,786		121,699			62,771		62,629			(18,914	)		928,608
Operating profit		59,294		34,452		4,416			12,084		(16,454	)		(1,518	)		92,274
Other income (deductions)		2,329		529		(30	)		153		8,072			(2,199	)		8,854
Income before income taxes		61,623		34,981		4,386			12,237		(8,382	)		(3,717	)		101,128
	Millions of yen
	Printing		Imaging		Medical			Industrial		Others<br>and<br>Corporate			Eliminations			Consolidated
2022:
Net sales:
External customers		569,122		200,872		118,131			75,887		34,787			—			998,799
Intersegment		1,340		25		100			2,375		19,753			(23,593	)		—
Total		570,462		200,897		118,231			78,262		54,540			(23,593	)		998,799
Operating cost and expenses		503,531		168,530		109,930			62,691		78,854			(23,212	)		900,324
Operating profit		66,931		32,367		8,301			15,571		(24,314	)		(381	)		98,475
Other income (deductions)		3,908		515		302			784		(18,385	)		(403	)		(13,279	)
Income before income taxes		70,839		32,882		8,603			16,355		(42,699	)		(784	)		85,196

Intersegment sales are recorded at the same prices used in transactions with third parties. Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. Corporate expenses include certain corporate research and development expenses. Amortization costs of identified intangible assets resulting from the purchase price allocation of Toshiba Medical Systems Corporation (currently, Canon Medical Systems Corporation) are also included in corporate expenses.

53

CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(19)	Segment Information (continued)

Information about sales by product and service to external customers by business unit for the six months ended June 30, 2023 and 2022 is as follows:

	Millions of yen
	Six months ended  <br>June 30, 2023		Six months ended  <br>June 30, 2022
Printing
Office multifunction devices		299,587		252,926
Office others		177,767		155,338
Office		477,354		408,264
Laser printers		299,477		324,713
Inkjet printers and Others		169,705		181,025
Prosumer		469,182		505,738
Production		183,582		161,188
Total		1,130,118		1,075,190
Imaging
Cameras		251,799		228,270
Network cameras and Others		159,760		129,578
Total		411,559		357,848
Medical
Diagnostic equipment		256,628		236,234
Industrial
Optical equipment		90,602		99,916
Industrial equipment		40,251		42,609
Total		130,853		142,525
Others and Corporate		62,849		66,352
Consolidated		1,992,007		1,878,149

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(19)	Segment Information (continued)

Information about sales by product and service to external customers by business unit for the three months ended June 30, 2023 and 2022 is as follows:

	Millions of yen
	Three months ended<br>June 30, 2023		Three months ended<br>June 30, 2022
Printing
Office multifunction devices		156,157		136,964
Office others		88,389		77,406
Office		244,546		214,370
Laser printers		149,184		175,380
Inkjet printers and Others		83,031		91,395
Prosumer		232,215		266,775
Production		96,653		87,977
Total		573,414		569,122
Imaging
Cameras		141,834		126,958
Network cameras and Others		77,366		73,914
Total		219,200		200,872
Medical
Diagnostic equipment		125,771		118,131
Industrial
Optical equipment		50,582		51,161
Industrial equipment		21,892		24,726
Total		72,474		75,887
Others and Corporate		30,023		34,787
Consolidated		1,020,882		998,799

Based on the realignment of Canon’s internal management structure, from the fourth quarter ended December 31, 2022, Canon has changed certain product categories and some product sales, which were previously included in Others, have been added to Lithography equipment and are presented as Optical equipment. Also, certain businesses, which were previously included in Office multifunction devices and Others and Corporate, have been presented as Inkjet printers and Others from the beginning of the first quarter of 2023. Operating results for the three and six months ended June 30, 2022 have also been reclassified.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(19)	Segment Information (continued)

Information by major geographic area for the six months ended June 30, 2023 and 2022 is as follows:

	Millions of yen
	Japan		Americas		Europe		Asia and<br>Oceania		Total
2023:
Net sales:		439,170		616,575		519,762		416,500		1,992,007
2022:
Net sales:		426,485		582,440		468,668		400,556		1,878,149

Information by major geographic area for the three months ended June 30, 2023 and 2022 is as follows:

	Millions of yen
	Japan		Americas		Europe		Asia and<br>Oceania		Total
2023:
Net sales:		210,419		321,353		265,764		223,346		1,020,882
2022:
Net sales:		205,927		329,770		250,988		212,114		998,799

Net sales are attributed to areas based on the location where the product is shipped to the customers.

(20)	Subsequent Events

On July 3, 2023, Canon borrowed ¥32,000 million under its existing overdraft facilities with Mizuho Bank, Ltd. and MUFG Bank, Ltd. for required operating funds. The overdraft facilities bear interest at a rate equal to a base rate plus a spread.

On July 3, 2023, Canon Medical Systems Corporation, a subsidiary of the Company, acquired 100% of the issued shares of Minaris Medical Co., Ltd. and Minaris Medical America, Inc., (hereinafter referred to collectively as “Minaris Medical”) from Resonac Corporation. In the medical business, Canon is working to strengthen our core business of diagnostic imaging systems, while also working to expand into areas such as healthcare IT and in vitro diagnostics. This acquisition will allow synergy between Minaris Medical’s diverse solutions in the in-vitro diagnostics business, and Canon’s technologies in the fields of automated biochemical analyzers, diagnostic imaging, and healthcare IT. By leveraging this synergy, Canon will be able to provide added value to meet the demands of the market. Further information related to the accounting for this business combination has not been disclosed, because none of the activities required to complete the initial accounting for this acquisition have been completed as of the issuance date of the consolidated financial statements for the second quarter of 2023.

On June 15, 2023, the Board of Directors of the Company approved a plan to repurchase its own shares under the Article 156, as applied pursuant to Paragraph 3, Article 165, of the Companies Act of Japan, as follows, and the repurchase of its own shares is in progress at the time of filing of the Quarterly Report with the Japanese government pursuant to the Financial Instruments and Exchange Law of Japan.

1.	Reason for repurchase: The Company decided to acquire its own shares with the aim of improving capital<br>efficiency and ensuring a flexible capital strategy that provides for such future transactions as share exchanges.
2.	Method of repurchase: Market trade
---	---
3.	Total number of shares to be repurchased: Up to 16.0 million shares of the Company’s common stock<br>
---	---
4.	Total cost of repurchase: Up to ¥50.0 billion
---	---
5.	Period of repurchase: From June 16, 2023 to August 21, 2023
---	---

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (continued)

(2)	Other Information

The Board of Directors approved an interim cash dividend at the meeting held on July 27, 2023 as below:

1. Total amount of interim cash dividends:

69,939 million yen

2. Amount of an interim cash dividend per share:

70 yen

3. Payment date:

August 25, 2023

Note:

The interim dividend is paid to registered shareholders as of June 30, 2023.

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