SONY 6-K, filed Feb 2, 2022, 0001157523-22-000132

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

the Securities Exchange Act of 1934

For the month of February 2022

Commission File Number: 001-06439

SONY GROUP CORPORATION

(Translation of registrant's name into English)

1-7-1 KONAN, MINATO-KU, TOKYO, 108-0075, JAPAN

(Address of principal executive offices)

The registrant files annual reports under cover of Form 20-F.

Indicate by check mark whether the registrant files or will file annual reports under cover of 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-______

SIGNATURE

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.

SONY GROUP CORPORATION
(Registrant)
By: /s/ Hiroki Totoki
(Signature)
Hiroki Totoki
Executive Deputy President and
Chief Financial Officer

Date: February 2, 2022

List of materials

Documents attached hereto:

i) Press release: Quarterly Financial Statements for the Third Quarter Ended December 31, 2021 And Outlook for the Fiscal Year Ending March 31, 2022

Quarterly Financial Statements

for the Third Quarter Ended December 31, 2021

And

Outlook for the Fiscal Year Ending March 31, 2022

February 2, 2022

Sony Group Corporation

Quarterly Financial Statements (Unaudited)	F-1
Condensed Consolidated Statements of Financial Position	F-1
Condensed Consolidated Statements of Income (Three months ended December 31)	F-3
Condensed Consolidated Statements of Comprehensive Income (Three months ended December 31)	F-4
Condensed Consolidated Statements of Income (Nine months ended December 31)	F-5
Condensed Consolidated Statements of Comprehensive Income (Nine months ended December 31)	F-6
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Nine months ended December 31)	F-7
Condensed Consolidated Statements of Cash Flows (Nine months ended December 31)	F-8
Notes to Condensed Consolidated Financial Statements	F-10
- Business Segment Information	F-10
- Going Concern Assumption	F-20
- Accounting Policy and Other Information	F-20
- First-time Adoption	F-23
- Subsequent Event	F-44
Outlook for the Fiscal Year Ending March 31, 2022	1
Cautionary Statement	4

All financial information is presented on the basis of International Financial Reporting Standards (“IFRS”).

Sony Group Corporation and its consolidated subsidiaries are together referred to as “Sony” or “Sony Group”.

(Unaudited)

Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Financial Position

	Yen in millions
	April 1,<br><br> <br>2020		March 31,<br><br> <br>2021		December 31,<br><br> <br>2021		Change from<br><br> <br>March 31, 2021
ASSETS
Current assets:
Cash and cash equivalents		1,512,523		1,786,982		1,822,578		35,596
Investments and advances in the Financial Services segment		327,092		411,982		368,624		(43,358	)
Trade and other receivables, and contract assets		1,194,334		1,365,493		1,820,533		455,040
Inventories		559,779		636,668		788,398		151,730
Other financial assets		135,482		117,682		92,868		(24,814	)
Other current assets		441,974		396,210		448,268		52,058
Total current assets		4,171,184		4,715,017		5,341,269		626,252
Non-current assets:
Investments accounted for using the equity method		204,291		225,086		240,597		15,511
Investments and advances in the Financial Services segment		16,352,285		17,296,546		18,564,035		1,267,489
Property, plant and equipment		917,198		990,541		1,073,749		83,208
Right-of-use assets		373,282		358,034		384,288		26,254
Goodwill		690,929		726,109		842,945		116,836
Content assets		992,644		1,062,547		1,227,215		164,668
Other intangible assets		377,500		391,055		433,052		41,997
Deferred insurance acquisition costs		187,904		623,986		639,170		15,184
Deferred tax assets		210,333		215,669		220,840		5,171
Other financial assets		321,721		695,764		806,349		110,585
Other non-current assets		167,795		207,489		221,628		14,139
Total non-current assets		20,795,882		22,792,826		24,653,868		1,861,042
Total assets		24,967,066		27,507,843		29,995,137		2,487,294

(Continued on the following page.)

F-1

Condensed Consolidated Statements of Financial Position (Continued)

	Yen in millions
	April 1,<br><br> <br>2020			March 31,<br><br> <br>2021			December 31,<br><br> <br>2021			Change from<br><br> <br>March 31, 2021
LIABILITIES
Current liabilities:
Short-term borrowings		824,045			1,201,747			1,731,978			530,231
Current portion of long-term debt		98,923			205,406			175,949			(29,457	)
Trade and other payables		1,310,536			1,596,563			1,738,923			142,360
Deposits from customers in the banking business		2,347,387			2,682,156			2,837,725			155,569
Income taxes payables		85,346			84,431			145,359			60,928
Participation and residual liabilities in the Pictures segment		163,007			161,433			197,497			36,064
Other financial liabilities		56,152			54,341			47,644			(6,697	)
Other current liabilities		1,263,944			1,367,527			1,400,726			33,199
Total current liabilities		6,149,340			7,353,604			8,275,801			922,197
Non-current liabilities:
Long-term debt		939,030			1,053,636			971,562			(82,074	)
Defined benefit liabilities		329,621			267,222			260,123			(7,099	)
Deferred tax liabilities		1,041,156			816,587			893,876			77,289
Future insurance policy benefits and other		6,519,577			6,614,585			6,889,551			274,966
Policyholders’ account in the life insurance business		3,640,010			4,328,894			4,773,928			445,034
Participation and residual liabilities in the Pictures segment		119,702			116,537			203,980			87,443
Other financial liabilities		146,834			139,417			187,353			47,936
Other non-current liabilities		87,320			93,022			102,014			8,992
Total non-current liabilities		12,823,250			13,429,900			14,282,387			852,487
Total liabilities		18,972,590			20,783,504			22,558,188			1,774,684
EQUITY
Sony Group Corporation’s stockholders’ equity:
Common stock		880,214			880,214			880,365			151
Additional paid-in capital		1,297,554			1,489,597			1,456,579			(33,018	)
Retained earnings		1,949,697			2,914,503			3,616,880			702,377
Accumulated other comprehensive income		979,476			1,520,257			1,579,744			59,487
Treasury stock, at cost		(232,503	)		(124,228	)		(147,399	)		(23,171	)
Equity attributable to Sony Group Corporation’s stockholders		4,874,438			6,680,343			7,386,169			705,826
Noncontrolling interests		1,120,038			43,996			50,780			6,784
Total equity		5,994,476			6,724,339			7,436,949			712,610
Total liabilities and equity		24,967,066			27,507,843			29,995,137			2,487,294

F-2

Condensed Consolidated Statements of Income

	Yen in millions
	Three months ended December 31
	2020		2021			Change
Sales and financial services revenue:
Sales		2,273,195		2,562,227			289,032
Financial services revenue		420,780		469,092			48,312
Total sales and financial services revenue		2,693,975		3,031,319			337,344
Costs and expenses:
Cost of sales		1,553,708		1,787,301			233,593
Selling, general and administrative		408,549		423,509			14,960
Financial services expenses		380,838		433,761			52,923
Other operating (income) expense, net		3,310		(70,960	)		(74,270	)
Total costs and expenses		2,346,405		2,573,611			227,206
Share of profit (loss) of investments accounted for using the equity method		4,323		7,475			3,152
Operating income		351,893		465,183			113,290
Financial income		36,896		4,962			(31,934	)
Financial expenses		5,012		8,576			3,564
Income before income taxes		383,777		461,569			77,792
Income taxes		72,805		113,645			40,840
Net income		310,972		347,924			36,952
Net income attributable to
Sony Group Corporation’s stockholders		310,731		346,161			35,430
Noncontrolling interests		241		1,763			1,522
	Yen
---	---	---	---	---	---	---
	Three months ended December 31
	2020		2021		Change
Per share data:
Net income attributable to Sony Group Corporation’s stockholders
- Basic		251.57		279.23		27.66
- Diluted		248.50		276.65		28.15

F-3

Condensed Consolidated Statements of Comprehensive Income

	Yen in millions
	Three months ended December 31
	2020			2021			Change
Net income		310,972			347,924			36,952
Other comprehensive income, net of tax -
Items that will not be reclassified to profit or loss
Changes in equity instruments measured at fair value through other comprehensive income		62,403			(40,247	)		(102,650	)
Remeasurement of defined benefit pension plans		(77	)		1,870			1,947
Share of other comprehensive income of investments accounted for using the equity method		(11	)		395			406
Items that may be reclassified subsequently to profit or loss
Changes in debt instruments measured at fair value through other comprehensive income		(11,610	)		23,242			34,852
Cash flow hedges		600			671			71
Insurance contract valuation adjustments		(644	)		21			665
Exchange differences on translating foreign operations		(2,570	)		54,388			56,958
Share of other comprehensive income of investments accounted for using the equity method		(79	)		338			417
Total other comprehensive income, net of tax		48,012			40,678			(7,334	)
Comprehensive income		358,984			388,602			29,618
Comprehensive income attributable to
Sony Group Corporation’s stockholders		358,809			385,770			26,961
Noncontrolling interests		175			2,832			2,657

F-4

Condensed Consolidated Statements of Income

	Yen in millions
	Nine months ended December 31
	2020			2021			Change
Sales and financial services revenue:
Sales		5,534,412			6,410,143			875,731
Financial services revenue		1,227,629			1,247,384			19,755
Total sales and financial services revenue		6,762,041			7,657,527			895,486
Costs and expenses:
Cost of sales		3,741,599			4,401,169			659,570
Selling, general and administrative		1,036,095			1,138,719			102,624
Financial services expenses		1,114,513			1,144,840			30,327
Other operating (income) expense, net		(12,441	)		(70,847	)		(58,406	)
Total costs and expenses		5,879,766			6,613,881			734,115
Share of profit (loss) of investments accounted for using the equity method		6,567			20,064			13,497
Operating income		888,842			1,063,710			174,868
Financial income		92,395			14,989			(77,406	)
Financial expenses		25,170			50,821			25,651
Income before income taxes		956,067			1,027,878			71,811
Income taxes		(20,721	)		252,443			273,164
Net income		976,788			775,435			(201,353	)
Net income attributable to
Sony Group Corporation’s stockholders		962,911			771,096			(191,815	)
Noncontrolling interests		13,877			4,339			(9,538	)
	Yen
---	---	---	---	---	---	---	---
	Nine months ended December 31
	2020		2021		Change
Per share data:
Net income attributable to Sony Group Corporation’s stockholders
- Basic		784.21		622.03		(162.18	)
- Diluted		770.92		616.00		(154.92	)

F-5

Condensed Consolidated Statements of Comprehensive Income

	Yen in millions
	Nine months ended December 31
	2020			2021			Change
Net income		976,788			775,435			(201,353	)
Other comprehensive income, net of tax -
Items that will not be reclassified to profit or loss
Changes in equity instruments measured at fair value through other comprehensive income		103,794			(70,656	)		(174,450	)
Remeasurement of defined benefit pension plans		(162	)		118			280
Share of other comprehensive income of investments accounted for using the equity method		131			341			210
Items that may be reclassified subsequently to profit or loss
Changes in debt instruments measured at fair value through other comprehensive income		(56,719	)		65,773			122,492
Cash flow hedges		(839	)		1,598			2,437
Insurance contract valuation adjustments		(1,837	)		157			1,994
Exchange differences on translating foreign operations		(13,142	)		69,019			82,161
Share of other comprehensive income of investments accounted for using the equity method		(90	)		355			445
Total other comprehensive income, net of tax		31,136			66,705			35,569
Comprehensive income		1,007,924			842,140			(165,784	)
Comprehensive income attributable to
Sony Group Corporation’s stockholders		1,020,443			836,770			(183,673	)
Noncontrolling interests		(12,519	)		5,370			17,889

F-6

Condensed Consolidated Statements of Changes in Stockholders’ Equity

	Yen in millions
	Common<br><br> <br>stock		Additional<br><br> <br>paid-in<br><br> <br>capital			Retained<br><br> <br>earnings			Accumulated<br><br> <br>other<br><br> <br>comprehensive<br><br> <br>income		Treasury<br><br> <br>stock, at<br><br> <br>cost			Sony Group<br><br> <br>Corporation’s<br><br> <br>stockholders’<br><br> <br>equity			Noncontrolling<br><br> <br>interests			Total equity
Balance at April 1, 2020		880,214		1,297,554			1,949,697			979,476		(232,503	)		4,874,438			1,120,038			5,994,476
Comprehensive income:
Net income							962,911								962,911			13,877			976,788
Other comprehensive income, net of tax										57,532					57,532			(26,396	)		31,136
Total comprehensive income							962,911			57,532					1,020,443			(12,519	)		1,007,924
Transfer to retained earnings							(6,321	)		6,321					–						-
Transactions with stockholders and other:
Exercise of stock acquisition rights				(353	)		(818	)				12,715			11,544						11,544
Conversion of convertible bonds				(3,218	)		(7,222	)				78,528			68,088						68,088
Stock-based compensation				1,006											1,006						1,006
Dividends declared							(61,343	)							(61,343	)		(12,996	)		(74,339	)
Purchase of treasury stock												(211	)		(211	)					(211	)
Reissuance of treasury stock				352								1,164			1,516						1,516
Transactions with noncontrolling interests shareholders and other				193,568						457,201					650,769			(1,053,310	)		(402,541	)
Balance at December 31, 2020		880,214		1,488,909			2,836,904			1,500,530		(140,307	)		6,566,250			41,213			6,607,463
	Yen in millions
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Common<br><br> <br>stock		Additional<br><br> <br>paid-in<br><br> <br>capital			Retained<br><br> <br>earnings			Accumulated<br><br> <br>other<br><br> <br>comprehensive<br><br> <br>income			Treasury<br><br> <br>stock, at<br><br> <br>cost			Sony Group<br><br> <br>Corporation’s<br><br> <br>stockholders’<br><br> <br>equity			Noncontrolling<br><br> <br>interests			Total equity
Balance at April 1, 2021		880,214		1,489,597			2,914,503			1,520,257			(124,228	)		6,680,343			43,996			6,724,339
Comprehensive income:
Net income							771,096									771,096			4,339			775,435
Other comprehensive income, net of tax										65,674						65,674			1,031			66,705
Total comprehensive income							771,096			65,674						836,770			5,370			842,140
Transfer to retained earnings							6,187			(6,187	)					–						–
Transactions with stockholders and other:
Issuance of new shares		151		151												302						302
Exercise of stock acquisition rights				479									9,141			9,620						9,620
Conversion of convertible bonds				(2,672	)		(521	)					16,439			13,246						13,246
Stock-based compensation				3,858												3,858						3,858
Dividends declared							(74,385	)								(74,385	)		(2,646	)		(77,031	)
Purchase of treasury stock													(50,498	)		(50,498	)					(50,498	)
Reissuance of treasury stock				1,543									1,747			3,290						3,290
Transactions with noncontrolling interests shareholders and other				(36,377	)											(36,377	)		4,060			(32,317	)
Balance at December 31, 2021		880,365		1,456,579			3,616,880			1,579,744			(147,399	)		7,386,169			50,780			7,436,949

F-7

Condensed Consolidated Statements of Cash Flows

	Yen in millions
	Nine months ended December 31
	2020			2021
Cash flows from operating activities:
Income before income taxes		956,067			1,027,878
Adjustments to reconcile income before income taxes to net cash provided by operating activities:
Depreciation and amortization, including amortization of contract costs		504,698			620,115
Amortization of deferred insurance acquisition costs		30,340			46,605
Other operating (income) expense, net		(12,441	)		(70,847	)
(Gain) loss on securities, net (other than Financial Services segment)		(78,150	)		23,606
Share of profit of investments accounted for using the equity method, net of dividends		(2,136	)		(11,588	)
Change in future insurance policy benefits and other		222,033			300,632
Change in policyholders’ account in the life insurance business, less cash impact		402,894			291,078
Net cash impact of policyholders’ account in the life insurance business		114,648			153,714
Changes in assets and liabilities:
Increase in trade receivables and contract assets		(458,944	)		(428,153	)
Increase in inventories		(40,643	)		(134,997	)
Increase in investments and advances in the Financial Services segment		(1,412,094	)		(1,079,760	)
Increase in content assets		(244,046	)		(398,351	)
Increase in deferred insurance acquisition costs		(67,364	)		(83,383	)
Increase in trade payables		353,587			140,852
Increase in deposits from customers in the banking business		277,152			164,387
Increase in borrowings in the life insurance business and the banking<br><br> <br>business		361,186			478,305
(Increase) decrease in other financial assets and other current assets		(955	)		13,599
Increase in other financial liabilities and other current liabilities		6,343			9,571
Income taxes paid		(57,153	)		(154,491	)
Other		104,343			(100,171	)
Net cash provided by operating activities		959,365			808,601

(Continued on the following page.)

F-8

Condensed Consolidated Statements of Cash Flows (Continued)

	Yen in millions
	Nine months ended December 31
	2020			2021
Cash flows from investing activities:
Payments for property, plant and equipment and other intangible assets		(359,953	)		(338,553	)
Proceeds from sales of property, plant and equipment and other intangible assets		13,476			8,038
Payments for investments and advances (other than Financial Services segment)		(93,683	)		(63,201	)
Proceeds from sales or return of investments and collections of advances<br><br> <br>(other than Financial Services segment)		19,611			23,033
Payments for purchase of businesses		(13,912	)		(224,970	)
Proceeds from sales of businesses		1,605			64,609
Other		1,904			7,820
Net cash used in investing activities		(430,952	)		(523,224	)
Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net		(19,798	)		1,381
Proceeds from issuance of long-term debt		227,018			18,370
Payments of long-term debt		(67,639	)		(161,721	)
Proceeds from issuance of short-term borrowings in connection with payment for purchase of noncontrolling interest in Sony<br> Financial Group Inc.		396,500			–
Payments of short-term borrowings in connection with payment for purchase of noncontrolling interest in Sony Financial Group Inc.		(200,000	)		–
Dividends paid		(61,153	)		(74,208	)
Payments for purchase of treasury stock		(211	)		(50,498	)
Payment for purchase of noncontrolling interest in Sony Financial Group Inc.		(396,698	)		-
Other		(12,418	)		(12,019	)
Net cash used in financing activities		(134,399	)		(278,695	)
Effect of exchange rate changes on cash and cash equivalents		(28,490	)		28,914
Net increase in cash and cash equivalents		365,524			35,596
Cash and cash equivalents at beginning of the fiscal year		1,512,523			1,786,982
Cash and cash equivalents at end of the period		1,878,047			1,822,578

F-9

Notes to Condensed Consolidated Financial Statements

Business Segment Information

(Business Segments)

Segment sales and financial services revenue

	Yen in millions
	Three months ended December 31
	2020			2021			Change
Sales and financial services revenue:
Game & Network Services -
Customers		865,790			796,734			(69,056	)
Intersegment		17,436			16,530			(906	)
Total		883,226			813,264			(69,962	)
Music -
Customers		261,724			292,371			30,647
Intersegment		2,738			3,502			764
Total		264,462			295,873			31,411
Pictures -
Customers		191,119			460,314			269,195
Intersegment		56			920			864
Total		191,175			461,234			270,059
Electronics Products & Solutions -
Customers		679,918			679,595			(323	)
Intersegment		19,110			7,351			(11,759	)
Total		699,028			686,946			(12,082	)
Imaging & Sensing Solutions -
Customers		243,899			305,885			61,986
Intersegment		23,129			18,928			(4,201	)
Total		267,028			324,813			57,785
Financial Services -
Customers		420,780			469,092			48,312
Intersegment		2,251			2,254			3
Total		423,031			471,346			48,315
All Other -
Customers		28,622			23,387			(5,235	)
Intersegment		4,544			4,041			(503	)
Total		33,166			27,428			(5,738	)
Corporate and elimination		(67,141	)		(49,585	)		17,556
Consolidated total		2,693,975			3,031,319			337,344

Game & Network Services (“G&NS”) intersegment amounts primarily consist of transactions with the Electronics Products & Solutions (“EP&S”) segment. EP&S intersegment amounts primarily consist of transactions with the G&NS segment. Imaging & Sensing Solutions (“I&SS”) intersegment amounts primarily consist of transactions with the G&NS segment and the EP&S segment. Corporate and elimination includes certain brand and patent royalty income.

F-10

Segment profit (loss)

	Yen in millions
	Three months ended December 31
	2020			2021			Change
Operating income (loss):
Game & Network Services		80,761			92,896			12,135
Music		59,074			55,113			(3,961	)
Pictures		20,279			149,372			129,093
Electronics Products & Solutions		103,378			80,036			(23,342	)
Imaging & Sensing Solutions		51,366			64,650			13,284
Financial Services		39,861			35,208			(4,653	)
All Other		6,987			8,178			1,191
Total		361,706			485,453			123,747
Corporate and elimination		(9,813	)		(20,270	)		(10,457	)
Consolidated operating income		351,893			465,183			113,290

Operating income (loss) is sales and financial services revenue less costs and expenses, and includes the share of profit (loss) of investments accounted for using the equity method.

The sales and financial services revenue and operating income (loss) for the three months ended December 31, 2020 shown in the table above are presented to reflect the change in the organizational structure for the fiscal year ending March 31, 2022, which is discussed on page F-20.

F-11

(Business Segments)

Segment sales and financial services revenue

	Yen in millions
	Nine months ended December 31
	2020			2021			Change
Sales and financial services revenue:
Game & Network Services -
Customers		1,959,383			2,027,428			68,045
Intersegment		36,590			47,085			10,495
Total		1,995,973			2,074,513			78,540
Music -
Customers		663,878			813,136			149,258
Intersegment		8,567			9,220			653
Total		672,445			822,356			149,911
Pictures -
Customers		551,754			925,246			373,492
Intersegment		1,062			1,430			368
Total		552,816			926,676			373,860
Electronics Products & Solutions -
Customers		1,556,280			1,814,019			257,739
Intersegment		37,544			31,114			(6,430	)
Total		1,593,824			1,845,133			251,309
Imaging & Sensing Solutions -
Customers		726,230			757,929			31,699
Intersegment		54,074			63,204			9,130
Total		780,304			821,133			40,829
Financial Services -
Customers		1,227,629			1,247,384			19,755
Intersegment		6,755			6,762			7
Total		1,234,384			1,254,146			19,762
All Other -
Customers		68,380			62,678			(5,702	)
Intersegment		12,991			11,197			(1,794	)
Total		81,371			73,875			(7,496	)
Corporate and elimination		(149,076	)		(160,305	)		(11,229	)
Consolidated total		6,762,041			7,657,527			895,486

G&NS intersegment amounts primarily consist of transactions with the EP&S segment. EP&S intersegment amounts primarily consist of transactions with the G&NS segment. I&SS intersegment amounts primarily consist of transactions with the G&NS segment and the EP&S segment. Corporate and elimination includes certain brand and patent royalty income.

F-12

Segment profit (loss)

	Yen in millions
	Nine months ended December 31
	2020			2021			Change
Operating income (loss):
Game & Network Services		310,029			258,834			(51,195	)
Music		148,964			161,079			12,115
Pictures		80,137			206,355			126,218
Electronics Products & Solutions		147,892			224,498			76,606
Imaging & Sensing Solutions		128,342			144,854			16,512
Financial Services		112,885			102,274			(10,611	)
All Other		12,038			20,950			8,912
Total		940,287			1,118,844			178,557
Corporate and elimination		(51,445	)		(55,134	)		(3,689	)
Consolidated operating income		888,842			1,063,710			174,868

Operating income (loss) is sales and financial services revenue less costs and expenses, and includes the share of profit (loss) of investments accounted for using the equity method.

The sales and financial services revenue and operating income (loss) for the nine months ended December 31, 2020 shown in the table above are presented to reflect the change in the organizational structure for the fiscal year ending March 31, 2022, which is discussed on page F-20.

F-13

(Sales to Customers by Product Category)

The following table is a breakdown of sales and financial services revenue to external customers by product category for each segment. Sony management views each segment as a single operating segment.

	Yen in millions
	Three months ended December 31
Sales and financial services revenue:	2020		2021		Change
Game & Network Services
Digital Software and Add-on Content		432,789		432,284		(505	)
Network Services		95,774		102,501		6,727
Hardware and Others		337,227		261,949		(75,278	)
Total		865,790		796,734		(69,056	)
Music
Recorded Music - Streaming		88,063		119,506		31,443
Recorded Music - Others		54,049		64,281		10,232
Music Publishing		44,997		51,902		6,905
Visual Media and Platform		74,615		56,682		(17,933	)
Total		261,724		292,371		30,647
Pictures
Motion Pictures		52,634		191,887		139,253
Television Productions		75,656		185,599		109,943
Media Networks		62,829		82,828		19,999
Total		191,119		460,314		269,195
Electronics Products & Solutions
Televisions		247,870		269,530		21,660
Audio and Video		116,974		105,330		(11,644	)
Still and Video Cameras		121,570		117,851		(3,719	)
Mobile Communications		111,061		102,339		(8,722	)
Other		82,443		84,545		2,102
Total		679,918		679,595		(323	)
Imaging & Sensing Solutions		243,899		305,885		61,986
Financial Services		420,780		469,092		48,312
All Other		28,622		23,387		(5,235	)
Corporate		2,123		3,941		1,818
Consolidated total		2,693,975		3,031,319		337,344

F-14

	Yen in millions
	Nine months ended December 31
Sales and financial services revenue:	2020		2021		Change
Game & Network Services
Digital Software and Add-on Content		1,124,487		1,067,578		(56,909	)
Network Services		284,966		304,932		19,966
Hardware and Others		549,930		654,918		104,988
Total		1,959,383		2,027,428		68,045
Music
Recorded Music - Streaming		235,790		341,911		106,121
Recorded Music - Others		127,732		150,065		22,333
Music Publishing		113,653		146,344		32,691
Visual Media and Platform		186,703		174,816		(11,887	)
Total		663,878		813,136		149,258
Pictures
Motion Pictures		203,091		368,479		165,388
Television Productions		190,895		333,885		142,990
Media Networks		157,768		222,882		65,114
Total		551,754		925,246		373,492
Electronics Products & Solutions
Televisions		559,056		697,730		138,674
Audio and Video		247,942		253,686		5,744
Still and Video Cameras		258,212		339,233		81,021
Mobile Communications		284,430		282,854		(1,576	)
Other		206,640		240,516		33,876
Total		1,556,280		1,814,019		257,739
Imaging & Sensing Solutions		726,230		757,929		31,699
Financial Services		1,227,629		1,247,384		19,755
All Other		68,380		62,678		(5,702	)
Corporate		8,507		9,707		1,200
Consolidated total		6,762,041		7,657,527		895,486

In the G&NS segment, Digital Software and Add-on Content includes distribution of software titles and add-on content through the network by Sony Interactive Entertainment; Network Services includes network services relating to game, video and music content; Hardware and Others includes home gaming consoles, packaged software, peripheral devices and first-party software for third-party platforms. In the Music segment, Recorded Music - Streaming includes the distribution of digital recorded music by streaming; Recorded Music - Others includes the distribution of recorded music by physical media and digital download as well as revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes the production and distribution of animation titles, including game applications based on the animation titles, and various service offerings for music and visual products. In the Pictures segment, Motion Pictures includes the worldwide production, acquisition and distribution of live-action and animated motion pictures; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks worldwide. In the EP&S segment, Televisions includes LCD and OLED televisions; Audio and Video includes Blu-ray disc players and recorders, home audio, headphones and memory-based portable audio devices; Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for broadcast; Mobile Communications includes smartphones and an internet-related service business; Other includes display products such as projectors and medical equipment.

F-15

(Condensed Financial Services Financial Statements)

The following schedules show unaudited condensed financial statements for the Financial Services segment and all other segments excluding Financial Services. These presentations are not in accordance with IFRS, which is used by Sony to prepare its condensed consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a comparative presentation may be useful in understanding and analyzing Sony’s condensed consolidated financial statements. Both financial statements include transactions between the Financial Services segment and Sony without the Financial Services segment (including noncontrolling interests). The figures shown in the respective presentations for the Financial Services segment and Sony without the Financial Services segment are prior to the elimination and/or offset of such transactions and deferred tax assets and deferred tax liabilities of each. The condensed consolidated financial statements column is presented net of the elimination and/or offset of such intercompany balances and deferred tax assets and liabilities.

Condensed Statements of Financial Position

	Yen in millions
	Financial Services						Sony without<br><br> <br>Financial Services						Consolidated
	April 1,<br><br> <br>2020		March 31,<br><br> <br>2021		December 31,<br><br> <br>2021		April 1,<br><br> <br>2020		March 31,<br><br> <br>2021		December 31,<br><br> <br>2021		April 1,<br><br> <br>2020		March 31,<br><br> <br>2021		December 31,<br><br> <br>2021
ASSETS
Current assets:
Cash and cash equivalents	¥	550,039	¥	497,218	¥	719,276	¥	962,484	¥	1,289,764	¥	1,103,302	¥	1,512,523	¥	1,786,982	¥	1,822,578
Investments and advances in the Financial Services segment		327,092		411,982		368,624		–		–		–		327,092		411,982		368,624
Trade and other receivables, and contract assets		115,592		119,791		151,806		1,086,457		1,261,321		1,689,911		1,194,334		1,365,493		1,820,533
Inventories		–		–		–		559,779		636,668		788,398		559,779		636,668		788,398
Other financial assets		79,721		73,349		51,682		55,762		44,498		41,181		135,482		117,682		92,868
Other current assets		51,765		51,147		61,193		390,915		357,582		416,998		441,974		396,210		448,268
Total current assets		1,124,209		1,153,487		1,352,581		3,055,397		3,589,833		4,039,790		4,171,184		4,715,017		5,341,269
Non-current assets:
Investments accounted for using the equity method		–		–		–		204,291		225,086		240,597		204,291		225,086		240,597
Investments and advances in the Financial Services segment		16,352,285		17,296,546		18,564,035		–		–		–		16,352,285		17,296,546		18,564,035
Investments in Financial Services, at cost		–		–		–		153,968		550,483		550,483		–		–		–
Property, plant and equipment		18,256		19,260		19,249		899,185		971,336		1,054,542		917,198		990,541		1,073,749
Right-of-use assets		57,892		65,775		71,388		315,431		292,262		312,902		373,282		358,034		384,288
Goodwill and intangible assets, including content assets		62,660		66,133		67,848		1,998,413		2,113,578		2,435,364		2,061,073		2,179,711		2,503,212
Deferred insurance acquisition costs		187,904		623,986		639,170		–		–		–		187,904		623,986		639,170
Deferred tax assets		8,129		–		–		202,217		309,341		259,745		210,333		215,669		220,840
Other financial assets		34,319		28,043		30,299		291,373		671,683		780,037		321,721		695,764		806,349
Other non-current assets		87,933		86,287		85,492		155,643		195,713		209,832		167,795		207,489		221,628
Total non-current assets		16,809,378		18,186,030		19,477,481		4,220,521		5,329,482		5,843,502		20,795,882		22,792,826		24,653,868
Total assets	¥	17,933,587	¥	19,339,517	¥	20,830,062	¥	7,275,918	¥	8,919,315	¥	9,883,292	¥	24,967,066	¥	27,507,843	¥	29,995,137
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings	¥	768,100	¥	1,160,896	¥	1,722,308	¥	154,884	¥	246,257	¥	185,619	¥	922,968	¥	1,407,153	¥	1,907,927
Trade and other payables		43,975		80,189		57,320		1,273,946		1,531,502		1,702,424		1,310,536		1,596,563		1,738,923
Deposits from customers in the banking business		2,347,387		2,682,156		2,837,725		–		–		–		2,347,387		2,682,156		2,837,725
Income taxes payables		22,509		5,407		3,928		62,837		79,024		141,431		85,346		84,431		145,359
Participation and residual liabilities in the Pictures segment		–		–		–		163,007		161,433		197,497		163,007		161,433		197,497
Other financial liabilities		44,668		29,106		35,461		11,484		25,235		12,183		56,152		54,341		47,644
Other current liabilities		179,652		192,728		205,888		1,085,330		1,187,975		1,225,139		1,263,944		1,367,527		1,400,726
Total current liabilities		3,406,291		4,150,482		4,862,630		2,751,488		3,231,426		3,464,293		6,149,340		7,353,604		8,275,801
Non-current liabilities:
Long-term debt		276,409		361,106		283,576		662,644		692,531		687,986		939,030		1,053,636		971,562
Defined benefit liabilities		34,856		35,293		36,383		294,765		231,929		223,740		329,621		267,222		260,123
Deferred tax liabilities		879,683		802,830		824,152		176,839		122,489		123,686		1,041,156		816,587		893,876
Future insurance policy benefits and other		6,519,577		6,614,585		6,889,551		–		–		–		6,519,577		6,614,585		6,889,551
Policyholders’ account in the life insurance business		3,640,010		4,328,894		4,773,928		–		–		–		3,640,010		4,328,894		4,773,928
Participation and residual liabilities in the Pictures segment		-		-		-		119,702		116,537		203,980		119,702		116,537		203,980
Other financial liabilities		115,949		109,537		118,602		33,399		32,446		71,375		146,834		139,417		187,353
Other non-current liabilities		4,217		5,309		5,912		106,693		109,808		117,319		87,320		93,022		102,014
Total non-current liabilities		11,470,701		12,257,554		12,932,104		1,394,042		1,305,740		1,428,086		12,823,250		13,429,900		14,282,387
Total liabilities		14,876,992		16,408,036		17,794,734		4,145,530		4,537,166		4,892,379		18,972,590		20,783,504		22,558,188
Equity:
Stockholders’ equity of Financial Services		3,054,361		2,928,525		3,031,981		–		–		–		–		–		–
Stockholders’ equity of Sony without Financial Services		–		–		–		3,084,820		4,341,109		4,943,480		–		–		–
Sony Group Corporation’s stockholders’ equity		–		–		–		–		–		–		4,874,438		6,680,343		7,386,169
Noncontrolling interests		2,234		2,956		3,347		45,568		41,040		47,433		1,120,038		43,996		50,780
Total equity		3,056,595		2,931,481		3,035,328		3,130,388		4,382,149		4,990,913		5,994,476		6,724,339		7,436,949
Total liabilities and equity	¥	17,933,587	¥	19,339,517	¥	20,830,062	¥	7,275,918	¥	8,919,315	¥	9,883,292	¥	24,967,066	¥	27,507,843	¥	29,995,137

F-16

Condensed Statements of Income

	Yen in millions
	Three months ended December 31
	Financial Services				Sony without<br><br> <br>Financial Services						Consolidated
	2020		2021		2020			2021			2020		2021
Sales	¥	–	¥	–	¥	2,274,479		¥	2,563,499		¥	2,273,195	¥	2,562,227
Financial services revenue		423,031		471,346		-			-			420,780		469,092
Total sales and financial services revenue		423,031		471,346		2,274,479			2,563,499			2,693,975		3,031,319
Cost of sales		–		–		1,556,542			1,790,131			1,553,708		1,787,301
Selling, general and administrative		–		–		407,004			421,950			408,549		423,509
Financial services expenses		383,089		436,016		-			-			380,838		433,761
Other operating (income) expense, net		81		122		3,229			(71,082	)		3,310		(70,960	)
Total costs and expenses		383,170		436,138		1,966,775			2,140,999			2,346,405		2,573,611
Share of profit (loss) of investments accounted for using the equity method		–		–		4,323			7,475			4,323		7,475
Operating income		39,861		35,208		312,027			429,975			351,893		465,183
Financial income (expenses), net		–		–		31,883			(3,616	)		31,884		(3,614	)
Income before income taxes		39,861		35,208		343,910			426,359			383,777		461,569
Income taxes		13,152		10,095		59,652			103,547			72,805		113,645
Net income		26,709		25,113		284,258			322,812			310,972		347,924
Net income of Financial Services	¥	26,466	¥	24,980	¥	–		¥	–		¥	–	¥	–
Net income of Sony without Financial Services	¥	–	¥	–	¥	284,261		¥	321,182		¥	–	¥	–
Net income attributable to Sony Group Corporation’s<br><br> <br>stockholders	¥	–	¥	–	¥	–		¥	–		¥	310,731	¥	346,161
Net income (loss) attributable to noncontrolling interests	¥	243	¥	133	¥	(3	)	¥	1,630		¥	241	¥	1,763

F-17

Condensed Statements of Income

	Yen in millions
	Nine months ended December 31
	Financial Services				Sony without<br><br> <br>Financial Services						Consolidated
	2020		2021		2020			2021			2020			2021
Sales	¥	-	¥	-	¥	5,538,638		¥	6,413,935		¥	5,534,412		¥	6,410,143
Financial services revenue		1,234,384		1,254,146		-			-			1,227,629			1,247,384
Total sales and financial services revenue		1,234,384		1,254,146		5,538,638			6,413,935			6,762,041			7,657,527
Cost of sales		–		–		3,749,830			4,409,132			3,741,599			4,401,169
Selling, general and administrative		–		–		1,032,106			1,134,547			1,036,095			1,138,719
Financial services expenses		1,121,268		1,151,603		–			–			1,114,513			1,144,840
Other operating (income) expense, net		231		269		(12,672	)		(71,116	)		(12,441	)		(70,847	)
Total costs and expenses		1,121,499		1,151,872		4,769,264			5,472,563			5,879,766			6,613,881
Share of profit (loss) of investments accounted for using the equity method		–		–		6,567			20,064			6,567			20,064
Operating income		112,885		102,274		775,941			961,436			888,842			1,063,710
Financial income (expenses), net		–		–		87,038			3,324			67,225			(35,832	)
Income before income taxes		112,885		102,274		862,979			964,760			956,067			1,027,878
Income taxes		30,832		26,002		(51,775	)		226,437			(20,721	)		252,443
Net income		82,053		76,272		914,754			738,323			976,788			775,435
Net income of Financial Services	¥	81,553	¥	75,881	¥	–		¥	–		¥	–		¥	–
Net income of Sony without Financial Services	¥	–	¥	–	¥	912,847		¥	734,375		¥	–		¥	–
Net income attributable to Sony Group Corporation’s<br><br> <br>stockholders	¥	–	¥	–	¥	–		¥	–		¥	962,911		¥	771,096
Net income attributable to noncontrolling interests	¥	500	¥	391	¥	1,907		¥	3,948		¥	13,877		¥	4,339

F-18

Condensed Statements of Cash Flows

	Yen in millions
	Nine months ended December 31
	Financial Services						Sony without<br><br> <br>Financial Services						Consolidated
	2020			2021			2020			2021			2020			2021
Cash flows from operating activities:
Income (loss) before income taxes	¥	112,885		¥	102,274		¥	862,979		¥	964,760		¥	956,067		¥	1,027,878
Adjustments to reconcile income (loss) before income taxes to net cash provided by (used in) operating activities:
Depreciation and amortization, including amortization of contract costs		17,675			18,682			487,023			601,433			504,698			620,115
Amortization of deferred insurance acquisition costs		30,340			46,605			–			–			30,340			46,605
Other operating (income) expense, net		231			269			(12,672	)		(71,116	)		(12,441	)		(70,847	)
(Gain) loss on securities, net (other than Financial Services segment)		-			-			(78,150	)		23,606			(78,150	)		23,606
Change in future insurance policy benefits and other		222,033			300,632			–			–			222,033			300,632
Change in policyholders’ account in the life insurance business, less cash impact		402,894			291,078			–			–			402,894			291,078
Net cash impact of policyholders’ account in the life insurance business		114,648			153,714			–			–			114,648			153,714
Changes in assets and liabilities:
(Increase) decrease in trade receivables and contract assets		(44,967	)		(35,697	)		(438,902	)		(398,020	)		(458,944	)		(428,153	)
(Increase) decrease in inventories		–			–			(40,643	)		(134,997	)		(40,643	)		(134,997	)
(Increase) decrease in investments and advances in the Financial Services segment		(1,412,094	)		(1,079,760	)		–			–			(1,412,094	)		(1,079,760	)
(Increase) decrease in content assets		–			–			(244,046	)		(398,351	)		(244,046	)		(398,351	)
(Increase) decrease in deferred insurance acquisition costs		(67,364	)		(83,383	)		–			–			(67,364	)		(83,383	)
Increase (decrease) in trade payables		24,717			(19,833	)		353,754			166,378			353,587			140,852
Increase (decrease) in deposits from customers in the banking business		277,152			164,387			–			–			277,152			164,387
Increase (decrease) in borrowings in the life insurance business and the banking business		361,186			478,305			–			–			361,186			478,305
Other		15,573			(55,107	)		35,003			(187,931	)		50,442			(243,080	)
Net cash provided by (used in) operating activities		54,909			282,166			924,346			565,762			959,365			808,601
Cash flows from investing activities:
Payments for property, plant and equipment and other intangible assets		(14,200	)		(15,720	)		(345,819	)		(322,833	)		(359,953	)		(338,553	)
Payments for investments and advances (other than Financial Services segment)		–			–			(93,683	)		(63,201	)		(93,683	)		(63,201	)
Proceeds from sales or return of investments and collections of advances (other than Financial Services segment)		–			–			19,611			23,033			19,611			23,033
Other		12			2,914			3,063			(147,417	)		3,073			(144,503	)
Net cash provided by (used in) investing activities		(14,188	)		(12,806	)		(416,828	)		(510,418	)		(430,952	)		(523,224	)
Cash flows from financing activities:
Increase (decrease) in borrowings, net		(7,445	)		(8,138	)		343,513			(133,832	)		336,081			(141,970	)
Dividends paid		(30,454	)		(39,159	)		(61,153	)		(74,208	)		(61,153	)		(74,208	)
Other		(80	)		(5	)		(398,606	)		(62,680	)		(409,327	)		(62,517	)
Net cash provided by (used in) financing activities		(37,979	)		(47,302	)		(116,246	)		(270,720	)		(134,399	)		(278,695	)
Effect of exchange rate changes on cash and cash equivalents		–			–			(28,490	)		28,914			(28,490	)		28,914
Net increase (decrease) in cash and cash equivalents		2,742			222,058			362,782			(186,462	)		365,524			35,596
Cash and cash equivalents at beginning of the fiscal year		550,039			497,218			962,484			1,289,764			1,512,523			1,786,982
Cash and cash equivalents at end of the period	¥	552,781		¥	719,276		¥	1,325,266		¥	1,103,302		¥	1,878,047		¥	1,822,578

F-19

Going Concern Assumption

Not Applicable

Accounting Policy and Other Information

(Net Income Attributable to Sony Group Corporation’s Stockholders and Weighted-average Number of Outstanding Shares Used for the Computation of EPS of Common Stock)

	Yen in millions
	Three months ended December 31
	2020		2021
Net income attributable to Sony Group Corporation’s stockholders		310,731		346,161
Adjustment amount to net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation:
Zero coupon convertible bonds		69		36
Net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation		310,800		346,197
	Thousands of shares
Weighted-average shares outstanding for basic EPS computation		1,235,162		1,239,709
Effect of dilutive securities:
Stock acquisition rights		4,460		5,954
Zero coupon convertible bonds		11,071		5,733
Weighted-average shares for diluted EPS computation		1,250,693		1,251,396
	Yen in millions
---	---	---	---	---
	Nine months ended December 31
	2020		2021
Net income attributable to Sony Group Corporation’s stockholders		962,911		771,096
Adjustment amount to net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation:
Zero coupon convertible bonds		329		129
Net income attributable to Sony Group Corporation’s stockholders for diluted EPS computation		963,240		771,225
	Thousands of shares
Weighted-average shares outstanding for basic EPS computation		1,227,879		1,239,640
Effect of dilutive securities:
Stock acquisition rights		4,019		5,504
Zero coupon convertible bonds		17,564		6,843
Weighted-average shares for diluted EPS computation		1,249,462		1,251,987

(Segmentation)

Due to organizational changes as of April 1, 2021, from the first quarter of the fiscal year ending March 31, 2022, Sony transferred some of the businesses and functions previously included within All Other and Corporate and elimination to the EP&S segment. In connection with these organizational changes, sales and financial services revenue and operating income (loss) of each segment for the fiscal year ended March 31, 2021 are presented to conform to the organizational structure for the fiscal year ending March 31, 2022.

The G&NS segment includes network services businesses, the manufacture and sales of home gaming products and the production and sales of software. The Music segment includes the Recorded Music, Music Publishing and Visual Media and Platform businesses. The Pictures segment includes the Motion Pictures, Television Productions and Media Networks businesses. The EP&S segment includes the Televisions business, the Audio and Video business, the Still and Video Cameras business, the smartphone business and internet-related service business. The I&SS segment includes the image sensors business. The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market and the banking business in Japan. All Other consists of various operating activities, including the disc manufacturing and recording media businesses. Sony’s products and services are generally unique to a single operating segment.

F-20

(Ellation Holdings, Inc. Acquisition)

On August 9, 2021, Sony Pictures Entertainment Inc. (“SPE”), a wholly-owned subsidiary of Sony, through Funimation Global Group, LLC (“Funimation”), acquired 100% of the equity interest in Ellation Holdings, Inc. (“Ellation”), a subsidiary of AT&T Inc., which operates the anime business “Crunchyroll”. Funimation is a joint venture between SPE and Aniplex Inc., a subsidiary of Sony Music Entertainment (Japan) Inc. The consideration for the acquisition of 135,575 million yen (1,234 million U.S. dollars) was paid in cash. As a result of the acquisition, Ellation has become a wholly-owned subsidiary of Sony.

Crunchyroll is a direct-to-consumer service, connecting anime and manga fans across more than 200 countries and territories. Crunchyroll provides services including subscription video-on-demand, advertising-based video-on-demand, mobile games, manga, events, merchandise and distribution. The acquisition brings together two animation distribution brands, Funimation and Crunchyroll, allowing Sony to expand fan-centric offerings.

As a result of the acquisition, Sony consolidated Ellation by using the acquisition method of accounting and recorded the fair value of the identifiable assets acquired, liabilities assumed and residual goodwill of Ellation. The following table summarizes the fair values assigned to the assets and liabilities of Ellation that were recorded in the Pictures segment. The purchase price allocation as of the date of the acquisition is preliminary and is subject to change as of December 31, 2021. The primary areas of the purchase price allocation that are not yet finalized are related to deferred tax liabilities, content assets, other intangible assets and goodwill.

	Yen in millions
Cash and cash equivalents		8,379
Trade and other receivables, and contract assets		3,714
Inventories		3,295
Right-of-use assets		4,962
Goodwill		80,366
Content assets		37,261
Other intangible assets		35,697
Other		2,512
Total assets		176,186
Trade and other payables		11,008
Participation and residual liabilities in the Pictures segment (current)		6,357
Other current liabilities		7,723
Long-term debt		4,386
Deferred tax liabilities		9,869
Other		659
Total liabilities		40,002

Content assets and other intangible assets mainly consist of license agreements and customer relationships. Goodwill represents unidentifiable intangible assets, such as future growth from new revenue streams and synergies with existing Sony assets and businesses, and is calculated as the excess of the purchase price over the estimated fair value of the tangible and intangible assets acquired and is not deductible for tax purposes. The goodwill recorded in connection with the acquisition is included in the Pictures segment.

Revenue and net income attributable to Ellation since the date of acquisition included in Sony’s consolidated statements of income and pro forma results of operations have not been presented because the effect of the acquisition was not material.

F-21

(Transfer of certain operations of Game Show Network, LLC)

On December 6, 2021, Sony completed the transfer of GSN Games, a division of Game Show Network, LLC, a wholly-owned subsidiary in the Pictures segment, to Scopely, Inc. (“Scopely”). The consideration for the transaction was 114,724 million yen (1,008 million U.S. dollars), of which Sony received 57,801 million yen (508 million U.S. dollars) in cash and 56,923 million yen (500 million U.S. dollars) in preferred stock of Scopely. The consideration is subject to customary working capital and other adjustments.

This preferred stock is measured at fair value as an equity instrument and subsequent changes in the fair value will be recognized in other comprehensive income. As a result of the completion of this transfer, Sony recognized a gain of 70,202 million yen (617 million U.S. dollars) within other operating (income) expense, net in the consolidated statements of income for the three and nine months ended December 31, 2021.

F-22

First-Time Adoption

Sony has disclosed its condensed consolidated financial statements under IFRS from the first quarter of the fiscal year ending March 31, 2022. The latest consolidated financial statements under generally accepted accounting principles in the United States (“U.S. GAAP”) were prepared for the fiscal year ended March 31, 2021, and the date of transition to IFRS was April 1, 2020.

(1) Exemption under IFRS 1 “First-Time Adoption of International Financial Reporting Standards” (“IFRS 1”)

IFRS 1 requires that a company adopting IFRS for the first-time (“first-time adopters”) shall apply IFRS retrospectively. However, IFRS 1 provides certain exemptions that allow first-time adopters to choose not to apply certain standards retrospectively. Sony has adopted the following exemptions:

Business combinations

First-time adopters may choose not to apply IFRS 3 “Business Combinations” (“IFRS 3”) retrospectively to business combinations that occurred before the date of transition to IFRS. Sony has applied this exemption and chosen not to apply IFRS 3 retrospectively to business combinations that occurred before the date of transition to IFRS. Therefore, the carrying amounts of goodwill generated in business combinations that occurred prior to the date of transition to IFRS were based on the carrying amounts determined under U.S. GAAP at the date of transition to IFRS.

Sony performed an impairment test on goodwill at the date of transition to IFRS regardless of whether there were any indications that the goodwill may be impaired.

Exchange differences on translating foreign operations

First-time adopters may choose to deem the cumulative exchange differences on translating foreign operations as zero at the date of transition to IFRS. Sony has chosen to apply this exemption and deemed all cumulative exchange differences on translating foreign operations as zero at the date of transition to IFRS.

Designation of financial instruments recognized before the date of transition to IFRS

First-time adopters may designate an investment in an equity instrument as an investment recognized at fair value through other comprehensive income in accordance with IFRS 9 “Financial Instruments” based on the facts and circumstances that existed at the date of transition to IFRS. Sony has applied this exemption and designated some equity instruments at fair value in other comprehensive income at the date of transition to IFRS.

Recognition of right-of-use assets and lease liabilities

When first-time adopters recognize right-of-use assets and lease liabilities as a lessee, they are permitted to measure right-of-use assets and lease liabilities at the date of transition to IFRS. Sony measured all lease liabilities at the date of transition to IFRS at the present value of the remaining lease payments, discounted using Sony’s incremental borrowing rate at the date of transition to IFRS. Sony recognized right-of-use assets equal to the amount of lease liabilities at the date of transition to IFRS.

(2) Mandatory exception under IFRS 1

IFRS 1 prohibits the retrospective application of IFRS concerning “estimates”, “non-controlling interests”, “classification and measurement of financial instruments” and other items. Sony applied these items prospectively from the date of transition to IFRS.

(3) Reconciliation

The reconciliations required to be disclosed in the first IFRS financial statements are described in the reconciliations as below. “Reclassification” includes items that do not affect retained earnings and comprehensive income, while “Recognition and measurement differences” includes items that affect retained earnings and comprehensive income.

F-23

Reconciliation of equity at the date of transition to IFRS (April 1, 2020)

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP*			Reclassification			Recognition and measurement<br><br> <br>differences			IFRS		Note		Accounts under IFRS
ASSETS														ASSETS
Current assets:														Current assets:
Cash and cash equivalents		1,512,357			–			166			1,512,523			Cash and cash equivalents
Marketable securities		1,847,772			(1,847,772	)		–			–		a
		–			327,092			–			327,092		a,f	Investments and advances in the Financial Services segment
Notes and accounts receivable, trade and contract assets		1,028,793			(1,028,793	)		–			–		b
		–			1,195,228			(894	)		1,194,334		b,c	Trade and other receivables, and contract assets
Allowance for credit losses		(26,153	)		26,153			-			-		b
Inventories		558,452			–			1,327			559,779			Inventories
Other receivables		188,076			(188,076	)		–			–		c
		-			135,265			217			135,482		d	Other financial assets
Prepaid expenses and other current assets		594,009			(153,473	)		1,438			441,974			Other current assets
Total current assets		5,703,306			(1,534,376	)		2,254			4,171,184			Total current assets

														Non-current assets:
Film costs		458,853			(458,853	)		–			–		e
Investments and advances:
Affiliated companies		207,922			(608	)		(3,023	)		204,291			Investments accounted for using the equity method
Securities investments and other		12,526,990			(12,526,990	)		–			–		f
Allowance for credit losses		(6,341	)		6,341			–			–
		-			13,906,535			2,445,750			16,352,285		a,f,D	Investments and advances in the Financial Services segment
Property, plant and equipment:
Land		81,482			(81,482	)		–			–
Buildings		659,556			(659,556	)		–			–
Machinery and equipment		1,725,720			(1,725,720	)		–			–
Construction in progress		76,391			(76,391	)		–			–
Less - Accumulated depreciation		1,634,505			(1,634,505	)		–			–
		–			921,513			(4,315	)		917,198			Property, plant and equipment
Other assets:
Operating lease right-of-use assets		359,510			(359,510	)		–			–		g
Finance lease right-of-use assets		33,100			(33,100	)		–			–		g
		–			376,998			(3,716	)		373,282		g	Right-of-use assets
Intangibles, net		906,310			(906,310	)		–			–		e
Goodwill		783,888			–			(92,959	)		690,929		C	Goodwill
		–			991,611			1,033			992,644		e	Content assets
		–			373,552			3,948			377,500		e	Other intangible assets
Deferred insurance acquisition costs		600,901			–			(412,997	)		187,904		E	Deferred insurance acquisition costs
Deferred income taxes		210,417			87			(171	)		210,333			Deferred tax assets
		–			298,469			23,252			321,721		f,h,D	Other financial assets
Other		339,284			(154,853	)		(16,636	)		167,795		h,B	Other non-current assets
		17,329,478			1,526,238			1,940,166			20,795,882			Total non-current assets
Total assets		23,032,784			(8,138	)		1,942,420			24,967,066			Total assets

F-24

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP*			Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement<br><br> <br>differences			IFRS			Note		Accounts under IFRS
LIABILITIES															LIABILITIES
Current liabilities:															Current liabilities:
Short-term borrowings		810,176			13,869			–			824,045				Short-term borrowings
Current portion of long-term debt		29,807			69,116			–			98,923			i	Current portion of long-term debt
Current portion of long-term operating lease liabilities		68,942			(68,942	)		–			–			i
Notes and accounts payable, trade		380,810			(380,810	)		–			–			j
		–			1,340,573			(30,037	)		1,310,536			j,k,m	Trade and other payables
Accounts payable, other and accrued expenses		1,630,197			(1,630,197	)		–			–			k
Deposits from customers in the banking business		2,440,783			(93,396	)		–			2,347,387			l	Deposits from customers in the banking business
Accrued income and other taxes		145,996			(60,650	)		–			85,346				Income taxes payables
		–			163,007			–			163,007			k	Participation and residual liabilities in the Pictures segment
		–			56,152			–			56,152			k,m	Other financial liabilities
Other		733,732			527,859			2,353			1,263,944			k,	Other current liabilities
Total current liabilities		6,240,443			(63,419	)		(27,684	)		6,149,340				Total current liabilities
															Non-current liabilities:
Long-term debt		634,966			305,871			(1,807	)		939,030			i	Long-term debt
Long-term operating lease liabilities		314,836			(314,836	)		–			–			i
Accrued pension and severance costs		324,655			4,355			611			329,621			B	Defined benefit liabilities
Deferred income taxes		548,034			87			493,035			1,041,156			F	Deferred tax liabilities
Future insurance policy benefits and other		6,246,047			–			273,530			6,519,577			E	Future insurance policy benefits and other
Policyholders’ account in the life insurance business		3,642,271			–			(2,261	)		3,640,010			E	Policyholders’ account in the life insurance business
		–			122,706			(3,004	)		119,702			n	Participation and residual liabilities in the Pictures segment
		–			146,834			–			146,834			l,n,o	Other financial liabilities
Other		289,285			(201,969	)		4			87,320			n	Other non-current liabilities
		12,000,094			63,048			760,108			12,823,250				Total non-current<br><br> <br>liabilities
Total liabilities		18,240,537			(371	)		732,424			18,972,590				Total liabilities
Redeemable noncontrolling interest		7,767			(7,767	)		–			–			o
EQUITY															EQUITY
Sony Group Corporation’s stockholders’ equity:															Sony Group Corporation’s stockholders’ equity:
Common stock		880,214			–			–			880,214				Common stock
Additional paid-in capital		1,289,719			–			7,835			1,297,554				Additional paid-in capital
Retained earnings		2,765,187			–			(815,490	)		1,949,697			G	Retained earnings
Accumulated other comprehensive income		(580,980	)		–			1,560,456			979,476		A,B,D E,F		Accumulated other comprehensive income
Treasury stock, at cost		(232,503	)		–			–			(232,503	)			Treasury stock, at cost
		4,121,637			–			752,801			4,874,438				Equity attributable to Sony Group Corporation’s stockholders
Noncontrolling interests		662,843			–			457,195			1,120,038			F	Noncontrolling interests
Total equity		4,784,480			–			1,209,996			5,994,476				Total equity
Total liabilities and equity		23,032,784			(8,138	)		1,942,420			24,967,066				Total liabilities and equity

* “U.S. GAAP” represents the consolidated financial statements under U.S. GAAP for the year ended March 31, 2020, adjusted for the adoption of the Accounting Standards Updates issued by the Financial Accounting Standards Board effective as of April 1, 2020.

F-25

Reconciliation of equity as of December 31, 2020

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP			Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement<br><br> <br>differences			IFRS		Note		Accounts under IFRS
ASSETS														ASSETS
Current assets:														Current assets:
Cash and cash equivalents		1,878,047			–			–			1,878,047			Cash and cash equivalents
Marketable securities		2,771,000			(2,771,000	)		–			–		a,p
		–			382,892			33			382,925		a,f	Investments and advances in the Financial Services segment
Notes and accounts receivable, trade and contract assets		1,310,227			(1,310,227	)		–			–		b
		–			1,639,819			(1,401	)		1,638,418		b,c	Trade and other receivables, and contract assets
Allowance for credit losses		(25,143	)		25,143			–			–		b
Inventories		605,437			–			(486	)		604,951			Inventories
Other receivables		308,178			(308,178	)		–			–		c
		–			100,489			217			100,706		d	Other financial assets
Prepaid expenses and other current assets		540,302			(157,268	)		(1,776	)		381,258		d	Other current assets
Total current assets		7,388,048			(2,398,330	)		(3,413	)		4,986,305			Total current assets

														Non-current assets:
Film costs		421,382			(421,382	)		–			–		e
Investments and advances:
Affiliated companies		220,221			(803	)		54			219,472			Investments accounted for using the equity method
Securities investments and other		13,635,160			(13,635,160	)		–			–		f
Allowance for credit losses		(8,370	)		8,370			–			–
		–			15,144,290			1,929,501			17,073,791		a,f,D	Investments and advances in the Financial Services segment
Property, plant and equipment:
Land		78,285			(78,285	)		–			–
Buildings		659,679			(659,679	)		–			–
Machinery and equipment		1,683,264			(1,683,264	)		–			–
Construction in progress		126,502			(126,502	)		–			–
Less - Accumulated depreciation		1,584,620			(1,584,620	)		–			–
		–			973,796			(3,981	)		969,815			Property, plant and equipment
Other assets:
Operating lease right-of-use assets		336,112			(336,112	)		–			–		g
Finance lease right-of-use assets		43,763			(43,763	)					–		g
		–			367,833			(6,529	)		361,304		g	Right-of-use assets
Intangibles, net		920,148			(920,148	)		–			–		e
Goodwill		791,000			(374	)		(95,279	)		695,347		C	Goodwill
		–			966,918			556			967,474		e	Content assets
		–			374,612			(1,417	)		373,195		e	Other intangible assets
Deferred insurance acquisition costs		639,831			–			(181,349	)		458,482		E	Deferred insurance acquisition costs
Deferred income taxes		182,494			(857	)		5,237			186,874			Deferred tax assets
		–			592,457			32,420			624,877		f,h,D	Other financial assets
Other		348,223			(137,372	)		(11,680	)		199,171		h,B	Other non-current assets
		18,493,074			1,969,195			1,667,533			22,129,802			Total non-current assets
Total assets		25,881,122			(429,135	)		1,664,120			27,116,107			Total assets

F-26

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP			Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement<br><br> <br>differences			IFRS			Note			Accounts under IFRS
LIABILITIES																LIABILITIES
Current liabilities:																Current liabilities:
Short-term borrowings		1,320,595			13,678			–			1,334,273					Short-term borrowings
Current portion of long-term debt		119,192			73,378			–			192,570			i		Current portion of long-term debt
Current portion of long-term operating lease liabilities		73,203			(73,203	)		–			–			i
Notes and accounts payable, trade		657,458			(657,458	)		–			–				j
		–			1,585,173			(92	)		1,585,081			j,k,m		Trade and other payables
Accounts payable, other and accrued expenses		1,660,096			(1,660,096	)		–			–			k
Deposits from customers in the banking business		2,723,808			(85,603	)		–			2,638,205			l		Deposits from customers in the banking business
Accrued income and other taxes		208,063			(71,677	)		(2,907	)		133,479					Income taxes payables
		–			153,645			(2,334	)		151,311			k		Participation and residual liabilities in the Pictures segment
		–			43,346			–			43,346			k,m,o		Other financial liabilities
Other		1,108,847			203,877			(7,517	)		1,305,207			k,m,p		Other current liabilities
Total current liabilities		7,871,262			(474,940	)		(12,850	)		7,383,472					Total current liabilities
																Non-current liabilities:
Long-term debt		737,258			277,572			(777	)		1,014,053			i		Long-term debt
Long-term operating lease liabilities		286,235			(286,235	)		–			–			i
Accrued pension and severance costs		314,559			3,593			7,895			326,047			B		Defined benefit liabilities
Deferred income taxes		340,015			(860	)		499,459			838,614			F		Deferred tax liabilities
Future insurance policy benefits and other		6,463,972			–			1,611			6,465,583			E		Future insurance policy benefits and other
Policyholders’ account in the life insurance business		4,159,852			–			(2,300	)		4,157,552			E		Policyholders’ account in the life insurance business
		–			109,526			(3,682	)		105,844			n		Participation and residual liabilities in the Pictures segment
		–			128,707			–			128,707			l,n,o		Other financial liabilities
Other		266,611			(178,090	)		251			88,772			n		Other non-current liabilities
		12,568,502			54,213			502,457			13,125,172					Total non-current<br><br> <br>liabilities
Total liabilities		20,439,764			(420,727	)		489,607			20,508,644					Total liabilities
Redeemable noncontrolling interest		8,035			(8,035	)		–			–			o
EQUITY																EQUITY
Sony Group Corporation’s stockholders’ equity:																Sony Group Corporation’s stockholders’ equity:
Common stock		880,214			–			–			880,214					Common stock
Additional paid-in capital		1,486,104			–			2,805			1,488,909					Additional paid-in capital
Retained earnings		3,788,596			–			(951,692	)		2,836,904			G		Retained earnings
Accumulated other comprehensive income		(624,047	)		–			2,124,577			1,500,530		A,B,C D,E,F			Accumulated other comprehensive income
Treasury stock, at cost		(140,307	)		–			–			(140,307	)				Treasury stock, at cost
		5,390,560			–			1,175,690			6,566,250					Equity attributable to Sony Group Corporation’s stockholders
Noncontrolling interests		42,763			(373	)		(1,177	)		41,213					Noncontrolling interests
Total equity		5,433,323			(373	)		1,174,513			6,607,463					Total equity
Total liabilities and equity		25,881,122			(429,135	)		1,664,120			27,116,107					Total liabilities and equity

F-27

Reconciliation of equity as of March 31, 2021

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP			Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement<br><br> <br>differences			IFRS		Note		Accounts under IFRS
ASSETS														ASSETS
Current assets:														Current assets:
Cash and cash equivalents		1,786,982			–			–			1,786,982			Cash and cash equivalents
Marketable securities		2,902,438			(2,902,438	)		–			–		a,p
		–			412,016			(34	)		411,982		a,f	Investments and advances in the Financial Services segment
Notes and accounts receivable, trade and contract assets		1,099,300			(1,099,300	)		–			–		b
		–			1,366,991			(1,498	)		1,365,493		b,c	Trade and other receivables, and contract assets
Allowance for credit losses		(29,406	)		29,406			–			–		b
Inventories		637,391			–			(723	)		636,668			Inventories
Other receivables		283,499			(283,499	)		–			–		c
		–			117,522			160			117,682		d	Other financial assets
Prepaid expenses and other current assets		538,540			(141,517	)		(813	)		396,210		d	Other current assets
Total current assets		7,218,744			(2,500,819	)		(2,908	)		4,715,017			Total current assets

														Non-current assets:
Film costs		459,426			(459,426	)		–			–		e
Investments and advances:
Affiliated companies		226,218			(1,132	)		–			225,086			Investments accounted for using the equity method
Securities investments and other		14,046,196			(14,046,196	)		–			–
Allowance for credit losses		(8,419	)		8,419			–			–
		–			15,639,456			1,657,090			17,296,546		a,f,D	Investments and advances in the Financial Services segment
Property, plant and equipment:
Land		79,557			(79,557	)		–			–
Buildings		683,249			(683,249	)		–			–
Machinery and equipment		1,748,961			(1,748,961	)		–			–
Construction in progress		100,728			(100,728	)		–			–
Less - Accumulated depreciation		1,627,061			(1,627,061	)		–			–
		–			994,676			(4,135	)		990,541			Property, plant and equipment
Other assets:
Operating lease right-of-use assets		337,322			(337,322	)		–			–		g
Finance lease right-of-use assets		39,772			(39,772	)		–			–		g
		–			365,641			(7,607	)		358,034		g	Right-of-use assets
Intangibles, net		996,305			(996,305	)		–			–		e
Goodwill		827,149			(398	)		(100,642	)		726,109		C	Goodwill
		–			1,062,865			(318	)		1,062,547		e	Content assets
		–			392,862			(1,807	)		391,055		e	Other intangible assets
Deferred insurance acquisition costs		657,420			–			(33,434	)		623,986		E	Deferred insurance acquisition costs
Deferred income taxes		207,470			(2,649	)		10,848			215,669			Deferred tax assets
		–			663,105			32,659			695,764		f,h,D	Other financial assets
Other		361,803			(137,916	)		(16,398	)		207,489		h,B	Other non-current assets
		19,136,096			2,120,474			1,536,256			22,792,826			Total non-current assets
Total assets		26,354,840			(380,345	)		1,533,348			27,507,843			Total assets

F-28

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP			Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement<br><br> <br>differences			IFRS			Note		Accounts under IFRS
LIABILITIES															LIABILITIES
Current liabilities:															Current liabilities:
Short-term borrowings		1,187,868			13,879			–			1,201,747				Short-term borrowings
Current portion of long-term debt		131,699			73,582			125			205,406			i	Current portion of long-term debt
Current portion of long-term operating lease liabilities		73,362			(73,362	)		–			–			i
Notes and accounts payable, trade		599,569			(599,569	)		–			–			j
		–			1,632,952			(36,389	)		1,596,563			j,k,m	Trade and other payables
Accounts payable, other and accrued expenses		1,756,833			(1,756,833	)		–			–			k
Deposits from customers in the banking business		2,773,885			(91,729	)		–			2,682,156			l	Deposits from customers in the banking business
Accrued income and other taxes		165,406			(82,594	)		1,619			84,431				Income taxes payables
		–			164,005			(2,572	)		161,433			k	Participation and residual liabilities in the Pictures segment
		–			54,341			–			54,341			k,m,o	Other financial liabilities
Other		1,126,802			234,441			6,284			1,367,527			k,m,p	Other current liabilities
Total current liabilities		7,815,424			(430,887	)		(30,933	)		7,353,604				Total current liabilities
															Non-current liabilities:
Long-term debt		773,294			281,086			(744	)		1,053,636			i	Long-term debt
Long-term operating lease liabilities		290,259			(290,259	)		–			–			i
Accrued pension and severance costs		254,103			12,364			755			267,222			B	Defined benefit liabilities
Deferred income taxes		366,761			(2,649	)		452,475			816,587			F	Deferred tax liabilities
Future insurance policy benefits and other		6,599,977			–			14,608			6,614,585			E	Future insurance policy benefits and other
Policyholders’ account in the life insurance business		4,331,065			–			(2,171	)		4,328,894			E	Policyholders’ account in the life insurance business
		–			120,712			(4,175	)		116,537			n	Participation and residual liabilities in the Pictures segment
		–			139,417			–			139,417			l,n,o	Other financial liabilities
Other		294,302			(201,551	)		271			93,022			n	Other non-current liabilities
		12,909,761			59,120			461,019			13,429,900				Total non-current<br><br> <br>liabilities
Total liabilities		20,725,185			(371,767	)		430,086			20,783,504				Total liabilities
Redeemable noncontrolling interest		8,179			(8,179	)		–			–			o
EQUITY															EQUITY
Sony Group Corporation’s stockholders’ equity:															Sony Group Corporation’s stockholders’ equity:
Common stock		880,214			–			–			880,214				Common stock
Additional paid-in capital		1,486,721			–			2,876			1,489,597				Additional paid-in capital
Retained earnings		3,857,152			–			(942,649	)		2,914,503				Retained earnings
Accumulated other comprehensive income		(524,020	)		–			2,044,277			1,520,257		A,B,C D,E,F		Accumulated other comprehensive income
Treasury stock, at cost		(124,228	)		–			–			(124,228	)			Treasury stock, at cost
		5,575,839			–			1,104,504			6,680,343				Equity attributable to Sony Group Corporation’s stockholders
Noncontrolling interests		45,637			(399	)		(1,242	)		43,996				Noncontrolling interests
Total equity		5,621,476			(399	)		1,103,262			6,724,339				Total equity
Total liabilities and equity		26,354,840			(380,345	)		1,533,348			27,507,843				Total liabilities and equity

F-29

Reconciliation of profit or loss for nine months ended December 31, 2020

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP			Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement<br><br> <br>differences			IFRS			Note		Accounts under IFRS
Sales and operating revenue:															Sales and financial services revenue:
Net sales		5,481,349			51,356			1,707			5,534,412			q	Sales
Financial services revenue		1,240,455			11,400			(24,226	)		1,227,629			r,D	Financial services revenue
Other operating revenue		57,137			(57,137	)		–			–			q
		6,778,941			5,619			(22,519	)		6,762,041				Total sales and financial services revenue
Costs and expenses:															Costs and expenses:
Cost of sales		3,753,504			(4,944	)		(6,961	)		3,741,599				Cost of sales
Selling, general and administrative		1,040,308			37			(4,250	)		1,036,095			B	Selling, general and administrative
Financial services expenses		1,102,877			11,491			145			1,114,513			r,D	Financial services expenses
Other operating income, net		(16,491	)		(771	)		4,821			(12,441	)		C	Other operating (income) expense, net
		5,880,198			5,813			(6,245	)		5,879,766				Total costs and expenses
Equity in net income of affiliated companies		6,642			–			(75	)		6,567			D	Share of profit (loss) of investments accounted for using the equity method
Operating income		905,385			(194	)		(16,349	)		888,842				Operating income
Other income:
Interest and dividends		7,109			(7,109	)		–			–
Gain on equity securities, net		205,727			(205,727	)		–			–
Other		4,210			(4,210	)		–			–
		–			215,951			(123,556	)		92,395			s,D	Financial income
Other expenses:
Interest expenses		7,265			(7,265	)		–			–
Foreign exchange loss, net		8,684			(8,684	)		–			–
Other		9,588			(9,588	)		–			–
		–			24,248			922			25,170			s,B	Financial expenses
Income before income taxes		1,096,894			–			(140,827	)		956,067			H	Income before income taxes
Income taxes		12,641			–			(33,362	)		(20,721	)		I	Income taxes
Net income		1,084,253			–			(107,465	)		976,788				Net income
															Net income attributable to
Net income attributable to Sony Group Corporation’s stockholders		1,064,776			–			(101,865	)		962,911				Sony Group Corporation’s stockholders
Net income attributable to noncontrolling interests		19,477			–			(5,600	)		13,877				Noncontrolling interests

F-30

Reconciliation of comprehensive income for nine months ended December 31, 2020

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP			Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement differences			IFRS			Note		Accounts under IFRS
Net income		1,084,253			–			(107,465	)		976,788				Net income
Other comprehensive income, net of tax -															Other comprehensive income, net of tax -
															Items that will not be reclassified to profit or loss
		–			–			103,794			103,794			D	Changes in equity instruments measured at fair value through other comprehensive income
Pension liability adjustment		6,805			–			(6,967	)		(162	)			Remeasurement of defined benefit pension plans
		–			–			131			131				Share of other comprehensive income of investments accounted for using the equity method
															Items that may be reclassified subsequently to profit or loss
Unrealized losses on securities		(64,428	)		–			7,709			(56,719	)		D,E,F	Changes in debt instruments measured at fair value through other comprehensive income
Unrealized gains on derivative instruments		668			–			(1,507	)		(839	)			Cash flow hedges
Debt valuation adjustments		(1,837	)					–			(1,837	)			Insurance contract valuation adjustments
Foreign currency translation adjustments		(26,787	)		90			13,555			(13,142	)			Exchange differences on translating foreign operations
		–			(90	)		–			(90	)			Share of other comprehensive income of investments accounted for using the equity method
		(85,579	)		–			116,715			31,136				Total other comprehensive income, net of tax
Total comprehensive income		998,674			–			9,250			1,007,924				Comprehensive income
															Comprehensive income attributable to
Comprehensive income attributable to Sony Group Corporation’s stockholders		991,808			–			28,635			1,020,443				Sony Group Corporation’s stockholders
Comprehensive income attributable to noncontrolling interests		6,866			–			(19,385	)		(12,519	)			Noncontrolling interests

F-31

Reconciliation of profit or loss for three months ended December 31, 2020

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP		Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement differences			IFRS		Note		Accounts under IFRS
Sales and operating revenue:													Sales and financial services revenue:
Net sales		2,252,904		20,200			91			2,273,195		q	Sales
Financial services revenue		423,432		3,913			(6,565	)		420,780		r,D	Financial services revenue
Other operating revenue		20,200		(20,200	)		–			–
		2,696,536		3,913			(6,474	)		2,693,975			Total sales and financial services revenue
Costs and expenses:													Costs and expenses:
Cost of sales		1,554,843		59			(1,194	)		1,553,708			Cost of sales
Selling, general and administrative		409,835		(16	)		(1,270	)		408,549		B	Selling, general and administrative
Financial services expenses		376,833		3,923			82			380,838		r,D	Financial services expenses
Other operating expense, net		295		12			3,003			3,310		C	Other operating (income) expense, net
		2,341,806		3,978			621			2,346,405			Total costs and expenses
Equity in net income of affiliated companies		4,496		–			(173	)		4,323		D	Share of profit (loss) of investments accounted for using the equity method
Operating income		359,226		(65	)		(7,268	)		351,893			Operating income
Other income:
Interest and dividends		1,753		(1,753	)		–			–
Gain on equity securities, net		120,234		(120,234	)		–			–
Foreign exchange gain, net		60		(60	)		–			–
Other		1,413		(1,413	)		–			–
		–		123,012			(86,116	)		36,896		s,D	Financial income
Other expenses:
Interest expenses		2,756		(2,756	)		–			–
Other		2,559		(2,559	)		–			–
		–		4,802			210			5,012		s,B	Financial expenses
Income before income taxes		477,371		–			(93,594	)		383,777		H	Income before income taxes
Income taxes		103,661		–			(30,856	)		72,805		I	Income taxes
Net income		373,710		–			(62,738	)		310,972			Net income
													Net income attributable to
Net income attributable to Sony Group Corporation’s stockholders		371,891		–			(61,160	)		310,731			Sony Group Corporation’s stockholders
Net income attributable to noncontrolling interests		1,819		–			(1,578	)		241			Noncontrolling interests

F-32

Reconciliation of comprehensive income for three months ended December 31, 2020

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP			Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement<br><br> <br>differences			IFRS			Note		Accounts under IFRS
Net income		373,710			–			(62,738	)		310,972				Net income
Other comprehensive income, net of tax -															Other comprehensive income, net of tax -
															Items that will not be reclassified to profit or loss
		–			–			62,403			62,403			D	Changes in equity instruments measured at fair value through other comprehensive income
Pension liability adjustment		2,346			–			(2,423	)		(77	)			Remeasurement of defined benefit pension plans
		–			–			(11	)		(11	)			Share of other comprehensive income of investments accounted for using the equity method
															Items that may be reclassified subsequently to profit or loss
Unrealized losses on securities		(26,546	)		–			14,936			(11,610	)		D,E,F	Changes in debt instruments measured at fair value through other comprehensive income
Unrealized gains on derivative instruments		1,539			–			(939	)		600				Cash flow hedges
Debt valuation adjustments		(644	)		–			–			(644	)			Insurance contract valuation adjustments
Foreign currency translation adjustments		(3,317	)		79			668			(2,570	)			Exchange differences on translating foreign operations
		–			(79	)		–			(79	)			Share of other comprehensive income of investments accounted for using the equity method
		(26,622	)		–			74,634			48,012				Total other comprehensive income, net of tax
Total comprehensive income		347,088			–			11,896			358,984				Comprehensive income
															Comprehensive income attributable to
Comprehensive income attributable to Sony Group Corporation’s stockholders		345,330			–			13,479			358,809				Sony Group Corporation’s stockholders
Comprehensive income attributable to noncontrolling interests		1,758			–			(1,583	)		175				Noncontrolling interests

F-33

Reconciliation of profit or loss for the fiscal year ended March 31, 2021

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP		Reclassification			Recognition<br><br> <br>and<br><br> <br>measurement differences			IFRS			Note		Accounts under IFRS
Sales and operating revenue:														Sales and financial services revenue:
Net sales		7,252,766		79,293			1,611			7,333,670			q	Sales
Financial services revenue		1,661,520		13,512			(10,041	)		1,664,991			r,D	Financial services revenue
Other operating revenue		85,074		(85,074	)		–			–			q
		8,999,360		7,731			(8,430	)		8,998,661				Total sales and financial services revenue
Costs and expenses:														Costs and expenses:
Cost of sales		5,072,596		(3,850	)		(2,867	)		5,065,879			B	Cost of sales
Selling, general and administrative		1,469,955		61			3,138			1,473,154			B	Selling, general and administrative
Financial services expenses		1,488,963		12,503			208			1,501,674			r,D	Financial services expenses
Other operating expense, net		7,468		(720	)		7,502			14,250			C	Other operating (income) expense, net
		8,038,982		7,994			7,981			8,054,957				Total costs and expenses
Equity in net income of affiliated companies		11,487		–			64			11,551			D	Share of profit (loss) of investments accounted for using the equity method
Operating income		971,865		(263	)		(16,347	)		955,255				Operating income
Other income:
Interest and dividends		10,457		(10,457	)		–			–
Gain on equity securities, net		247,026		(247,026	)		–			–
Other		6,752		(6,752	)		–			–
		–		264,692			(180,900	)		83,792			s,D	Financial income
Other expenses:
Interest expenses		12,185		(12,185	)		–			–
Foreign exchange loss, net		16,056		(16,056	)		–			–
Net periodic benefit costs other than service cost		8,811		(8,811	)		–			–
Other		6,678		(6,678	)		–			–
		–		43,924			(2,842	)		41,082			s,B	Financial expenses
Income before income taxes		1,192,370		–			(194,405	)		997,965			H	Income before income taxes
Income taxes		995		–			(46,926	)		(45,931	)		I	Income taxes
Net income		1,191,375		–			(147,479	)		1,043,896				Net income
														Net income attributable to
Net income attributable to Sony Group Corporation’s stockholders		1,171,776		–			(142,166	)		1,029,610				Sony Group Corporation’s stockholders
Net income attributable to noncontrolling interests		19,599		–			(5,313	)		14,286				Noncontrolling interests

F-34

Reconciliation of comprehensive income for the fiscal year ended March 31, 2021

	Yen in millions
Accounts under U.S.<br><br> <br>GAAP	U.S. GAAP			Reclassification			Recognition and measurement differences			IFRS			Note		Accounts under IFRS
Net income		1,191,375			–			(147,479	)		1,043,896				Net income
Other comprehensive income, net of tax -															Other comprehensive income, net of tax -
															Items that will not be reclassified to profit or loss
		–			–			144,740			144,740			D	Changes in equity instruments measured at fair value through other comprehensive income
Pension liability adjustment		12,965			–			(1,410	)		11,555				Remeasurement of defined benefit pension plans
		–			–			87			87				Share of other comprehensive income of investments accounted for using the equity method
															Items that may be reclassified subsequently to profit or loss
Unrealized losses on securities		(102,492	)		–			(103,057	)		(205,549	)		D,E,F	Changes in debt instruments measured at fair value through other comprehensive income
Unrealized gains on derivative instruments		1,513			–			(1,462	)		51				Cash flow hedges
Debt valuation adjustments		(3,120	)		–			–			(3,120	)			Insurance contract valuation adjustments
Foreign currency translation adjustments		106,826			(798	)		9,293			115,321				Exchange differences on translating foreign operations
		-			798			-			798				Share of other comprehensive income of investments accounted for using the equity method
		15,692			–			48,191			63,883				Total other comprehensive income, net of tax
Total comprehensive income		1,207,067			–			(99,288	)		1,107,779				Comprehensive income
															Comprehensive income attributable to
Comprehensive income attributable to Sony Group Corporation’s stockholders		1,198,836			–			(80,208	)		1,118,628				Sony Group Corporation’s stockholders
Comprehensive income attributable to noncontrolling interests		8,231			–			(19,080	)		(10,849	)			Noncontrolling interests

F-35

(4) Notes to reconciliation

Reclassifications

a.	“Marketable securities”, which were separately presented under U.S. GAAP, have been reclassified into “Investments and advances in the Financial<br> Services segment” as current assets under IFRS. Investments held for variable annuities and variable life insurance contracts in the life insurance business, which were included in “Marketable securities” under U.S. GAAP, have been<br> reclassified into “Investments and advances in the Financial Services segment” as current assets or non-current assets under IFRS, after considering the current/non-current distinction based on the purpose of the investments related to<br> the insurance liabilities in accordance with paragraph 66 of International Accounting Standards 1 “Presentation of Financial Statements” (“IAS 1”).
b.	“Notes and accounts receivable, trade and contract assets” and “Allowance for credit losses”, which were separately presented under U.S. GAAP, have<br> been reclassified into “Trade and other receivables, and contract assets” under IFRS.
c.	“Other receivables”, which were separately presented under U.S. GAAP, have been reclassified into “Trade and other receivables, and contract assets”<br> under IFRS.
d.	“Other financial assets”, which were included in “Prepaid expenses and other current assets” under U.S. GAAP, are separately presented under IFRS.
e.	“Film costs”, which were presented separately, and music catalogs, artist contracts, music distribution rights and other content assets, which were<br> included in “Intangibles, net” under U.S. GAAP are collectively reclassified and presented as “Content assets” under IFRS. “Intangibles, net” other than those reclassified and presented as “Content assets” have been reclassified into<br> “Other intangible assets” under IFRS.
f.	“Securities investments and other”, which were separately presented under U.S. GAAP, have been reclassified into “Investments and advances in the<br> Financial Services segment” as non-current assets for the amounts related to the Financial Services segment and “Other financial assets” as non-current assets for the amounts related to all segments excluding the Financial Services<br> segment under IFRS. Housing loans in the banking business, which were included in “Securities investments and other” under U.S. GAAP, have been reclassified into “Investments and advances in the Financial Services segment” as current<br> assets or non-current assets under IFRS after considering the current/non-current distinction based on the terms of the contract in accordance with paragraph 66 of IAS 1.
g.	“Operating lease right-of-use assets” and “Finance lease right-of-use assets”, which were separately presented under U.S. GAAP, have been reclassified<br> into “Right-of-use assets” under IFRS.
h.	“Other financial assets”, which were included in “Other” in other assets under U.S. GAAP, are separately presented under IFRS.
i.	“Current portion of long-term operating lease liabilities” and “Long-term operating lease liabilities”, which were separately presented under U.S.<br> GAAP, have been reclassified into “Current portion of long-term debt” and “Long-term debt”, respectively under IFRS.
j.	“Notes and accounts payable, trade”, which were separately presented under U.S. GAAP, have been reclassified into “Trade and other payables” under<br> IFRS.
k.	“Accounts payable, other and accrued expenses”, which were separately presented under U.S. GAAP, have been reclassified into either “Trade and other<br> payables”, “Participation and residual liabilities in the Pictures segment”, “Other financial liabilities” or “Other current liabilities” under IFRS.
l.	“Deposits from customers in the banking business”, which were separately presented under U.S. GAAP, have been reclassified into “Other financial<br> liabilities” of non-current liabilities under IFRS, after considering the current/non-current distinction based on the terms of the contract in accordance with paragraph 69 of IAS 1.
m.	“Trade and other payables” and “Other financial liabilities”, which were included in current liabilities “Other” under U.S. GAAP, are separately<br> presented under IFRS.
n.	“Participation and residual liabilities in the Pictures segment” and “Other financial liabilities”, which were included in “Other” in other than<br> current liabilities under U.S. GAAP, are separately presented under IFRS.
o.	“Redeemable noncontrolling interest”, which was separately presented under U.S. GAAP, has been reclassified into “Other financial liabilities” under IFRS.
p.	Under U.S. GAAP, securities received as collateral other than cash in lending transactions are accounted for as “Marketable securities” and also as<br> “Other current liabilities” representing Sony’s obligation to return the collateral, which was 426,467 million yen and 373,274 million yen as of December 31, 2020 and March 31, 2021, respectively. Under IFRS, the securities received as<br> collateral other than cash shall be recognized in the consolidated statements of financial position if they are sold or the transferor defaults. None of the securities was recognized in the consolidated statements of financial position<br> as of December 31, 2020 and March 31, 2021.
q.	“Other operating revenue”, which was separately presented under U.S. GAAP, has been reclassified into “Sales” under IFRS.
r.	Under IFRS, “Financial services revenue” and “Financial services expenses” have increased by the same amount due to the gross up of revenue and<br> expenses related to service transactions, based on the presentation requirements.
s.	Under IFRS, “Financial income” and “Financial expenses” have been presented separately, based on the presentation requirements.

F-36

Recognition and measurement differences

A. Exchange differences on translating foreign operations

Under IFRS 1, first-time adopters may choose to deem the cumulative exchange differences on translating foreign operations as zero at the date of transition to IFRS. Sony has chosen to apply this exemption and transferred all cumulative exchange differences on translating foreign operations into retained earnings at the date of transition to IFRS.

The impact of this change is as follows:

	Yen in millions
	April 1,<br><br> <br>2020			December 31,<br><br> <br>2020			March 31,<br><br> <br>2021
(Consolidated Statements of Financial Position)
Accumulated other comprehensive income		(509,872	)		(509,139	)		(510,091	)
Adjustment to retained earnings		(509,872	)		(509,139	)		(510,091	)

B. Post-employment benefits

Under U.S. GAAP, past service costs and actuarial gains and losses are deferred in accumulated other comprehensive income, and subsequently reclassified to profit or loss over a certain period of time in the future.

Under IFRS, past service costs are expensed as incurred. Adjustments due to remeasurements of the net defined benefit liabilities or assets, such as actuarial gains and losses, are recognized in other comprehensive income when incurred and immediately transferred to retained earnings and are not reclassified to profit or loss in a subsequent period.

In addition, if the fair value of plan assets is in excess of the present value of defined benefit obligations, the amount of any asset to be recognized is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

The impact of this change before considering the tax effect is as follows:

	Yen in millions
	April 1,<br><br> <br>2020			December 31,<br><br> <br>2020			March 31,<br><br> <br>2021
(Consolidated Statements of Financial Position)
Other non-current assets		(16,829	)		(12,310	)		(17,083	)
Defined benefit liabilities		30			(7,217	)		(62	)
Accumulated other comprehensive income		(300,385	)		(293,245	)		(277,379	)
Adjustment to retained earnings		(317,184	)		(312,772	)		(294,524	)
	Yen in millions
---	---	---	---	---	---	---	---	---
	Nine months<br><br> <br>ended<br><br> <br>December 31, 2020			Three months<br><br> <br>ended<br><br> <br>December 31, 2020		Fiscal year<br><br> <br>ended<br><br> <br>March 31, 2021
(Consolidated Statements of Income)
Cost of sales		–			–		(2,193	)
Selling, general and administrative		(484	)		35		(244	)
Financial expenses		5,720			1,308		9,476
Increase (decrease) in adjustment to income before income taxes		5,236			1,343		7,039

F-37

C. Impairment of goodwill

The level at which goodwill is tested for impairment differs between U.S. GAAP and IFRS. Under U.S. GAAP, goodwill is tested for impairment at the reporting unit level. Reporting units are Sony’s operating segments or one level below the operating segments. The identification of reporting units is dependent on the level at which discrete financial information is available and regularly reviewed by the segment manager. Under IFRS, goodwill is tested for impairment at the level of the cash-generating unit (“CGU”) or group of CGUs, which represent the lowest level at which goodwill is monitored for internal management purposes, which may be a lower level of grouping than a reporting unit under U.S. GAAP. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.

Upon the transition to IFRS, Sony assessed its reporting units to determine if such reporting units should be further divided into several CGUs under IFRS. As a result, Sony determined that certain CGUs should be grouped at a lower level than a reporting unit under U.S. GAAP. In addition, Sony performed an impairment test for goodwill at the date of transition to IFRS regardless of whether there were any indications that the goodwill may be impaired based on conditions at the date of transition to IFRS. In performing the impairment test, Sony used the goodwill balance under U.S. GAAP attributed to each CGU or group of CGUs based on the history of acquisitions of the businesses. Under U.S. GAAP, when a business within a reporting unit was disposed of (including when classified as held for sale), goodwill was allocated to the remaining business and the disposed business based on relative fair value, and only the goodwill allocated to the disposed business was written off. Under IFRS, since certain disposed businesses represented individual CGUs or a group of CGUs, at the time of disposition, all the goodwill that was recognized for such businesses would have been written off. The assessment resulted in impairments related to CGUs or groups of CGUs of the businesses that Sony disposed of prior to the date of transition to IFRS. In addition, the assessment resulted in impairments related to CGUs or groups of CGUs of the businesses that existed at the date of transition to IFRS where the recoverable amount was lower than the carrying amount.

As a result, at the date of transition to IFRS, goodwill decreased by 96,817 million yen, and retained earnings decreased by the same amount. The impact of this change was primarily in the I&SS and Pictures segments and is discussed below.

In the I&SS segment, at the date of transition to IFRS, Sony recognized 43,376 million yen of impairment losses in retained earnings, which includes the impairment loss related to the goodwill allocated to CGUs or groups of CGUs of the businesses that Sony disposed of prior to the date of transition to IFRS as well as the Internet of Things (“IoT”)-related business which existed at the date of transition to IFRS. The recoverable amount of the IoT-related business was determined by the value in use and a pre-tax discount rate of 9.8% was used in the measurement.

In the Pictures segment, at the date of transition to IFRS, Sony recognized 48,749 million yen of impairment losses in retained earnings, which includes the impairment loss related to the goodwill allocated to CGUs or groups of CGUs of the businesses that Sony disposed of prior to the date of transition to IFRS as well as the United States television network CGU which existed at the date of transition to IFRS. The recoverable amount of the United States television network CGU was determined by the value in use and a pre-tax discount rate of 15.9% was used in the measurement.

The impact of this change is as follows:

	Yen in millions
	April 1,<br><br> <br>2020			December 31,<br><br> <br>2020			March 31,<br><br> <br>2021
(Consolidated Statements of Financial Position)
Goodwill		(96,817	)		(95,306	)		(100,727	)
Accumulated other comprehensive income		–			(2,642	)		2,942
Adjustment to retained earnings		(96,817	)		(97,948	)		(97,785	)
	Yen in millions
---	---	---	---	---	---	---	---	---	---
	Nine months<br><br> <br>ended<br><br> <br>December 31, 2020			Three months<br><br> <br>ended<br><br> <br>December 31, 2020			Fiscal year<br><br> <br>ended<br><br> <br>March 31, 2021
(Consolidated Statements of Income)
Other operating (income) expense, net		(1,131	)		(1,376	)		(968	)
Increase (decrease) in adjustment to income before income taxes		(1,131	)		(1,376	)		(968	)

F-38

The carrying amount of goodwill by segment is as follows:

	Yen in millions
	April 1,<br><br> <br>2020		March 31,<br><br> <br>2021
Game & Network Services *1		170,974		172,360
Music *2		391,325		408,424
Pictures *3		103,626		120,083
Electronics Products & Solutions		11,354		11,533
Imaging & Sensing Solutions		2,816		2,875
Financial Services		10,834		10,834
Total		690,929		726,109

*1 Game & Network Services (“G&NS”)

All of the goodwill shown in the G&NS line of the table above relates to the PlayStation® business. Goodwill related to the CGU has a carrying amount of 170,974 million yen and 172,360 million yen, as of April 1, 2020 and March 31, 2021, respectively. Intangible assets with indefinite useful lives related to the PlayStation® business have a carrying amount of 57,397 million yen and 57,449 million yen, as of April 1, 2020 and March 31, 2021, respectively, which are included in “Other intangible assets”. Intangible assets with indefinite useful lives include the trademark for PlayStation®, which is assessed to have an indefinite useful life as the trademark for PlayStation® is utilized as the core trademark for Sony’s products and services throughout the G&NS segment and Sony expects to continue using the trademark in the future as well. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on a three-year forecasted period derived from the mid-range plan (“MRP”). A perpetual growth rate is utilized to determine a terminal cash flow value and is set after the final year of the forecasted period. The growth rate and the pre-tax discount rate are 1.5% and 9.8% as of April 1, 2020 and 1.5% and 8.7% as of March 31, 2021, respectively.

*2 Music

Goodwill shown in the Music line of the table above is primarily allocated to the worldwide recorded music and music publishing CGUs excluding operations in Japan.

Goodwill related to the worldwide recorded music CGU has a carrying amount of 128,918 million yen and 136,572 million yen, as of April 1, 2020 and March 31, 2021, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on a three-year forecasted period derived from the MRP. A perpetual growth rate is utilized to determine a terminal cash flow value and is set after the final year of the forecasted period. The growth rate and the pre-tax discount rate are 1.0% and 9.2% as of April 1, 2020 and 1.0% and 9.3% as of March 31, 2021, respectively.

Goodwill related to the music publishing CGU has a carrying amount of 238,684 million yen and 248,130 million yen, as of April 1, 2020 and March 31, 2021, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on a three-year forecasted period derived from the MRP. A perpetual growth rate is utilized to determine a terminal cash flow value and is set after the final year of the forecasted period. The growth rate and the pre-tax discount rate are 2.5% and 8.4% as of April 1, 2020 and 2.5% and 8.2% as of March 31, 2021, respectively.

*3 Pictures

Goodwill shown in the Pictures line of the table above is primarily allocated to the United States television network CGU. Goodwill related to the CGU is recognized with the carrying amounts of 54,156 million yen and 55,092 million yen, as of April 1, 2020 and March 31, 2021, respectively. The recoverable amount of the CGU is determined by the value in use. The value in use is calculated by discounting the estimated future cash flows including a terminal value. The estimated future cash flows are prepared based on a three-year forecasted period derived from the MRP. The terminal value is based on an earnings multiple applied to the final year of the forecasted earnings. The growth rate beyond the MRP period and the pre-tax discount rate are 1.0% and 15.9% as of April 1, 2020 and 1.0% and 14.7% as of March 31, 2021, respectively.

F-39

The value in use calculation uses key assumptions such as the pre-tax discount rate, perpetual growth rate, competitive and regulatory environment, and technology trends. For each assumption, historical experience, external information, competitors and industry trends are taken into account. Sony does not expect the recoverable amounts to be lower than the carrying amounts even when the growth rate and pre-tax discount rate that are used in the evaluation of the recoverable amounts change within a reasonably predictable range.

D. Equity instruments and debt instruments

Under U.S. GAAP, equity securities are recognized at fair value and subsequent changes in fair value are recognized in profit or loss. Equity securities that do not have readily determinable fair values are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Additionally, under U.S. GAAP, debt securities that are held-to-maturity, primarily in the life insurance business, are carried at amortized cost.

Under IFRS, equity instruments are recognized at fair value and subsequent changes in fair value are recognized in profit or loss. However, for investments in equity instruments which are not held for trading, Sony may make an irrevocable election at initial recognition to present subsequent changes in fair value of the investments in other comprehensive income. Such financial assets are measured at fair value and subsequent changes in the fair value are recognized in other comprehensive income.

Additionally, under IFRS, debt instruments, which are primarily in the life insurance business, are classified as financial assets measured at fair value through other comprehensive income if the debt instruments are held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Changes in the fair value of the financial assets after initial recognition, except for impairment gains or losses and foreign exchange gains or losses, are recognized in other comprehensive income.

The impact of this change before considering the tax effect is as follows:

	Yen in millions
	April 1,<br><br> <br>2020			December 31,<br><br> <br>2020			March 31,<br><br> <br>2021
(Consolidated Statements of Financial Position)
Other financial assets (non-current)		22,110			31,641			31,627
Investments and advances in the Financial Services segment (non-current)		2,439,946			1,921,779			1,649,660
Accumulated other comprehensive income		(2,424,510	)		(2,075,857	)		(1,840,980	)
Adjustment to retained earnings		37,546			(122,437	)		(159,693	)
	Yen in millions
---	---	---	---	---	---	---	---	---	---
	Nine months<br><br> <br>ended<br><br> <br>December 31, 2020			Three months<br><br> <br>ended<br><br> <br>December 31, 2020			Fiscal year<br><br> <br>ended<br><br> <br>March 31, 2021
(Consolidated Statements of Income)
Financial services revenue		(29,832	)		(8,334	)		(12,547	)
Financial services expenses		(600	)		(254	)		(854	)
Share of profit (loss) of investments accounted for using the equity method		(169	)		(173	)		(30	)
Financial income		(123,641	)		(86,401	)		(178,677	)
Increase (decrease) in adjustment to income before income taxes		(154,242	)		(95,162	)		(192,108	)

F-40

E. Insurance-related accounts

In accordance with Sony’s first-time adoption of IFRS 4 “Insurance Contracts” at the date of transition to IFRS, insurance contracts are recognized and measured based on the same accounting principles previously applied under U.S. GAAP. Under IFRS, the amount of insurance-related accounts was affected by shadow accounting in the life insurance business as a result of the increase in financial instruments to be measured at fair value through other comprehensive income. This change is mainly because the shadow liability adequacy test indicated that the insurance liabilities were not recorded at a sufficient level at the date of transition to IFRS and as of December 31, 2020.

The impact of this change before considering the tax effect is as follows:

	Yen in millions
	April 1,<br><br> <br>2020			December 31,<br><br> <br>2020			March 31,<br><br> <br>2021
(Consolidated Statements of Financial Position)
Deferred insurance acquisition costs		(412,997	)		(181,349	)		(33,434	)
Future insurance policy benefits and other		(273,530	)		(1,611	)		(14,609	)
Policyholders’ account in the life insurance business		2,261			2,300			2,170
Accumulated other comprehensive income		684,266			180,660			45,873

F. Impact of changes in the measurement method of debt instruments in the life insurance business on deferred tax liabilities and noncontrolling interests

In connection with “D. Equity instruments and debt instruments” and “E. Insurance-related accounts”, accumulated other comprehensive income is affected due to the change in the measurement method of debt instruments in the life insurance business and the change in the amount of insurance-related accounts as a result of the application of shadow accounting.

The impact of this change on deferred tax liabilities and noncontrolling interests is as follows:

	Yen in millions
	April 1,<br><br> <br>2020			December 31,<br><br> <br>2020			March 31,<br><br> <br>2021
(Consolidated Statements of Financial Position)
Deferred tax liabilities		(489,839	)		(489,727	)		(452,189	)
Noncontrolling interests		(440,099	)		–			–
Accumulated other comprehensive income		929,938			489,727			452,189

G. Retained earnings

Main items of the differences on retained earnings are as follows:

	Yen in millions
	April 1,<br><br> <br>2020			December 31,<br><br> <br>2020			March 31,<br><br> <br>2021
Retained earnings under U.S. GAAP		2,765,187			3,788,596			3,857,152
1 Exchange differences on translating foreign operations *A		(509,872	)		(509,139	)		(510,091	)
2 Post-employment benefits *B		(317,184	)		(312,772	)		(294,524	)
3 Impairment of goodwill *C		(96,817	)		(97,948	)		(97,785	)
4 Equity instruments and debt instruments *D		37,546			(122,437	)		(159,693	)
5 Other		6,616			(6,854	)		13,249
Tax effect of adjustments		64,221			97,458			106,195
Total		(815,490	)		(951,692	)		(942,649	)
Retained earnings under IFRS		1,949,697			2,836,904			2,914,503

F-41

H. Income before income taxes

Main items of the differences on income before income taxes are as follows:

	Yen in millions
	Nine months<br><br> <br>ended<br><br> <br>December 31, 2020			Three months<br><br> <br>ended<br><br> <br>December 31, 2020			Fiscal year<br><br> <br>ended<br><br> <br>March 31, 2021
Income before income taxes under U.S. GAAP		1,096,894			477,371			1,192,370
1 Post-employment benefits *B		5,236			1,343			7,039
2 Impairment of goodwill *C		(1,131	)		(1,376	)		(968	)
3 Equity instruments and debt instruments *D		(154,242	)		(95,162	)		(192,108	)
4 Other		9,310			1,601			(8,368	)
Total		(140,827	)		(93,594	)		(194,405	)
Income before income taxes under IFRS		956,067			383,777			997,965

I. Income taxes

Due to the adoption of IFRS, income taxes have been adjusted by recording the tax effects on various IFRS adjustments recognized and measured, and other IFRS tax effects.

(5) Reconciliation of consolidated statements of cash flows

Main items of the differences on consolidated statements of cash flows are as follows:

	Yen in millions
	Nine months ended December 31, 2020
	Cash flows from<br><br> <br>operating activities			Cash flows from<br><br> <br>investing activities			Cash flows from<br><br> <br>financing activities
Consolidated statements of cash flows under U.S. GAAP		1,087,508			(1,372,187	)		676,660
1. Principal payments for operating lease liabilities^*1^		54,005			–			(54,005	)
2. Additions and disposals of content assets^*2^		(31,808	)		31,808			–
3. Changes in assets and liabilities in the Financial Services<br><br> <br>segment^*3^
(1) Investments and advances in the Financial Services<br><br> <br>segment		(905,247	)		905,247			–
(2) Deposits from customers in the banking business		278,243			–			(278,243	)
(3) Borrowings in the life insurance business and the banking<br><br> <br>business		361,708			–			(361,708	)
(4) Future insurance policy benefits and other and<br><br> <br>policyholders’ account in the life insurance business		114,648			–			(114,648	)
4. Other		308			4,180			(2,455	)
Total		(128,143	)		941,235			(811,059	)
Consolidated statements of cash flows under IFRS		959,365			(430,952	)		(134,399	)

F-42

	Yen in millions
	Fiscal year ended March 31, 2021
	Cash flows from<br><br> <br>operating activities			Cash flows from<br><br> <br>investing activities			Cash flows from<br><br> <br>financing activities
Consolidated statements of cash flows under U.S. GAAP		1,350,150			(1,781,516	)		666,967
1. Principal payments for operating lease liabilities^*1^		72,098			–			(72,098	)
2. Additions and disposals of content assets^*2^		(34,751	)		34,751			–
3. Changes in assets and liabilities in the Financial Services<br><br> <br>segment^*3^
(1) Investments and advances in the Financial Services<br><br> <br>segment		(1,181,744	)		1,181,744			–
(2) Deposits from customers in the banking business		332,987			–			(332,987	)
(3) Borrowings in the life insurance business and the banking<br><br> <br>business		463,783			–			(463,783	)
(4) Future insurance policy benefits and other and<br><br> <br>policyholders’ account in the life insurance business		134,299			–			(134,299	)
4. Other		3,395			1,111			(2,333	)
Total		(209,933	)		1,217,606			(1,005,500	)
Consolidated statements of cash flows under IFRS		1,140,217			(563,910	)		(338,533	)

*1 The principal payments for operating lease liabilities

Under U.S. GAAP, lessees classify leases as either operating leases or finance leases, and the principal payments for the operating lease liabilities are classified as cash flows from operating activities in the consolidated statements of cash flows. Under IFRS, the distinction between operating leases and finance leases no longer exists for lessees, and all of the principal payments for lease liabilities are classified as cash flows from financing activities in the consolidated statements of cash flows.

*2 The additions and disposals of content assets

Under U.S. GAAP, Sony classified the cash flows from the additions and disposals of film costs as cash flows from operating activities, and classified the cash flows from the additions and disposals of music catalogs, artist contracts, music distribution rights and other content assets as cash flows from investing activities in the consolidated statements of cash flows based on the nature of such transactions as additions and disposals of intangible assets. Under IFRS, Sony defines these intangible assets as content assets, and classifies the cash flows from the additions and disposals of content assets as cash flows from operating activities in the consolidated statements of cash flows except for additions and disposals of content assets from business combinations or business divestitures, because the additions and disposals of content assets are derived from the principal revenue-producing activities of Sony.

*3 Changes in assets and liabilities in the Financial Services segment

Under U.S. GAAP, Sony classified cash flows from changes in investments and advances in the Financial Services segment and repurchase agreements in the Financial Services segment, deposits from customers in the banking business and policyholders’ account in the life insurance business according to the nature of these transactions in the consolidated statements of cash flows. Under IFRS, Sony classifies cash flows from these transactions as cash flows from operating activities in the consolidated statements of cash flows as these transactions are viewed as integral to the principal revenue-producing activities of Sony.

F-43

Subsequent Event

Acquisition of Bungie, Inc.

On January 31, 2022, Sony Interactive Entertainment LLC, a wholly-owned subsidiary of Sony, entered into definitive agreements to acquire 100% of the shares of Bungie, Inc., an independent videogame developer in the United States. The total consideration of this transaction is 3.6 billion U.S. dollars, inclusive of purchase price and committed employee incentives, and is subject to customary working capital and other adjustments. This transaction is subject to certain closing conditions, including regulatory approvals.

F-44

Outlook for the Fiscal Year Ending March 31, 2022

The forecast for consolidated results for the fiscal year ending March 31, 2022, as announced on October 28, 2021, has been revised as follows:

	(Billions of yen)
	March 31, 2021<br><br> <br>Results		October<br><br> <br>Forecast		February<br><br> <br>Forecast		Change from<br> October Forecast
Sales *^1^	¥	8,998.7	¥	9,900	¥	9,900		–	–
Operating income		955.3		1,040		1,200	+ 160 bil	+ 15.4	%
Income before income taxes		998.0		990		1,155	+ 165 bil	+ 16.7	%
Net income attributable to Sony Group Corporation’s stockholders		1,029.6		730		860	+ 130 bil	+17.8	%
For all segments excluding the Financial Services segment *2	March 31, 2021<br><br> <br>Results		October<br><br> <br>Forecast		February<br><br> <br>Forecast		Change from<br> October Forecast
Net cash provided by operating activities	¥	1,150.3	¥	890	¥	940	+ 50 bil	+5.6	%

All values are in Japanese Yen.

*^1^ “Sales and Financial Services revenue” are shown as “Sales” (the same applies below).

*^2^ Cash flow for all segments excluding the Financial Services segment is not a measure in accordance with IFRS. However, Sony believes that this disclosure may be useful information to investors. Please refer to page F-16 for details about the preparation of the Condensed Statements of Cash Flows.

Assumed foreign exchange rates are the following:

	Assumed foreign currency exchange rates for<br><br> <br>the three months<br><br> <br>ending March 31, 2022	(For your reference)<br><br> <br>Assumed foreign currency exchange rates for the<br><br> <br>fiscal year ending March 31, 2022 at the time of the October forecast
1 U.S. dollar	approximately 113 yen	approximately 111 yen
1 Euro	approximately 128 yen	approximately 130 yen

The sales forecast for the fiscal year ending March 31, 2022 remains unchanged from the October forecast due to higher-than-expected sales in the Financial Services, Electronics Products & Solutions (“EP&S”), Pictures and Music segments, partially offset by lower-than-expected sales in the Game & Network Services (“G&NS”) and Imaging & Sensing Solutions segments.

Operating income is expected to be higher than the October forecast due to expected increases in operating income in the Pictures, G&NS, EP&S and Music segments, as well as an expected decrease in the operating loss in All Other, Corporate and elimination.

Both income before income taxes and net income attributable to Sony Group Corporation’s stockholders are expected to be higher than the October forecast mainly due to the above-mentioned expected increase in operating income.

The forecast for each business segment for the fiscal year ending March 31, 2022 has been revised as follows:

	(Billions of yen)
	March 31, 2021<br><br> <br>Results			October<br><br> <br>Forecast			February<br><br> <br>Forecast
Game & Network Services (G&NS)
Sales	¥	2,656.3		¥	2,900		¥	2,730
Operating income		341.7			325			345
Music
Sales		939.9			1,070			1,090
Operating income		184.8			200			205
Pictures
Sales		753.0			1,180			1,220
Operating income		79.9			108			205
Electronics Products & Solutions (EP&S) *
Sales		2,068.1			2,280			2,360
Operating income		127.9			190			210
Imaging & Sensing Solutions (I&SS)
Sales		1,012.5			1,100			1,070
Operating income		145.9			150			150
Financial Services
Financial services revenue		1,674.0			1,490			1,610
Operating income		154.8			153			153
All Other, Corporate and elimination *
Operating loss		(79.6	)		(86	)		(68	)
Consolidated
Sales		8,998.7			9,900			9,900
Operating income		955.3			1,040			1,200

* Due to organizational changes as of April 1, 2021, from the first quarter of the fiscal year ending March 31, 2022, Sony transferred some of the businesses and functions previously included within All Other and Corporate and elimination to the EP&S segment. Sales and operating income (loss) of each segment for the fiscal year ended March 31, 2021 in the above chart are presented to conform to the organizational structure for the fiscal year ending March 31, 2022.

Game & Network Services (G&NS)

Sales are expected to be lower than the October forecast due to an expected decrease in PlayStation®5 hardware unit sales, primarily due to shortages in the supply of components, especially semiconductors. Operating income is expected to be higher than the October forecast due to an expected decrease in selling, general and administrative expenses.

Music

Sales are expected to be higher than the October forecast due to stronger-than-expected sales from game applications for mobile devices and license revenue in the anime business in Visual Media and Platform as well as the impact of foreign exchange rates. Operating income is expected to be higher than the October forecast due to the impact of the above-mentioned expected increase in sales.

Pictures

Sales are expected to be higher than the October forecast primarily due to an expected increase in sales for Motion Pictures resulting from the strong theatrical performances of Spider-Man: No Way Home and Venom: Let There Be Carnage, which were released in the third quarter of the current fiscal year. Operating income is expected to be higher than the October forecast due to the recording of a 70.2 billion yen gain from the transfer of GSN Games, a division of Game Show Network, LLC in the third quarter of the current fiscal year and the impact of the above-mentioned expected increase in sales in Motion Pictures.

Electronics Products & Solutions (EP&S)

Sales are expected to be higher than the October forecast due to an expected increase in sales of televisions resulting from an expected improvement in the product mix as well as the impact of foreign exchange rates. Operating income is expected to be higher than the October forecast due to the impact of an improvement in the product mix of digital cameras and other products as well as a decrease in operating expenses, partially offset by the impact of lower unit sales of digital cameras, televisions and smartphones.

Imaging & Sensing Solutions (I&SS)

Sales are expected to be lower than the October forecast primarily due to lower-than-expected sales of image sensors for mobile products and businesses other than image sensors. Operating income is expected to remain unchanged from the October forecast mainly due to the positive impact of foreign exchange rates, substantially offset by the impact of the above-mentioned expected decrease in sales.

Financial Services

Financial services revenue is expected to be higher than the October forecast primarily due to an expected increase in net gains on investments in the separate accounts at Sony Life Insurance Co., Ltd. (“Sony Life”). Operating income is expected to remain unchanged from the October forecast.

The effects of future gains and losses on investments held by the Financial Services segment due to market fluctuations have not been incorporated within the above forecast as it is difficult for Sony to predict market trends in the future. Accordingly, future market fluctuations could further impact the above forecast.

The above forecast is based on management’s current expectations and is subject to uncertainties and changes in circumstances. Actual results may differ materially from those included in this forecast due to a variety of factors. See “Cautionary Statement” below.

Notes about Financial Performance of the Music, Pictures and Financial Services segments

The Music segment results include the yen-based results of Sony Music Entertainment (Japan) Inc. and the yen-translated results of Sony Music Entertainment and Sony Music Publishing LLC, which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis.

The Pictures segment results are the yen-translated results of Sony Pictures Entertainment Inc., which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis.

The Financial Services segment results include Sony Financial Group Inc. (“SFGI”) and SFGI’s consolidated subsidiaries such as Sony Life, Sony Assurance Inc. and Sony Bank Inc. The results discussed in the Financial Services segment differ from the results that SFGI discloses separately on a Japanese statutory basis. On October 1, 2021, SFGI changed its company name from Sony Financial Holdings Inc.

Cautionary Statement

Statements made in this release with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to:

(i)	Sony’s ability to maintain product quality and customer satisfaction with its products and services;
(ii)	Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including image sensors, game and network platforms,<br> smartphones and televisions, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing customer<br> preferences;
(iii)	Sony’s ability to implement successful hardware, software, and content integration strategies, and to develop and implement successful sales and distribution strategies in light of new technologies and<br> distribution platforms;
(iv)	the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures, investments, capital expenditures, restructurings and other strategic<br> initiatives;
(v)	changes in laws, regulations and government policies in the markets in which Sony and its third-party suppliers, service providers and business partners operate, including those related to taxation, as well as<br> growing consumer focus on corporate social responsibility;
(vi)	Sony’s continued ability to identify the products, services and market trends with significant growth potential, to devote sufficient resources to research and development, to prioritize investments and capital<br> expenditures correctly and to recoup its investments and capital expenditures, including those required for technology development and product capacity;
(vii)	Sony’s reliance on external business partners, including for the procurement of parts, components, software and network services for its products or services, the manufacturing, marketing and distribution of its<br> products, and its other business operations;
(viii)	the global economic and political environment in which Sony operates and the economic and political conditions in Sony’s markets, particularly levels of consumer spending;
(ix)	Sony’s ability to meet operational and liquidity needs as a result of significant volatility and disruption in the global financial markets or a ratings downgrade;
(x)	Sony’s ability to forecast demands, manage timely procurement and control inventories;
(xi)	foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in which Sony’s assets, liabilities<br> and operating results are denominated;
(xii)	Sony’s ability to recruit, retain and maintain productive relations with highly skilled personnel;
(xiii)	Sony’s ability to prevent unauthorized use or theft of intellectual property rights, to obtain or renew licenses relating to intellectual property rights and to defend itself against claims that its products or<br> services infringe the intellectual property rights owned by others;
(xiv)	the impact of changes in interest rates and unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the<br> Financial Services segment;
(xv)	shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment;
(xvi)	risks related to catastrophic disasters, pandemic disease or similar events;
(xvii)	the ability of Sony, its third-party service providers or business partners to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sony’s business information and the<br> personally identifiable information of its employees and customers, potential business disruptions or financial losses; and
(xviii)	the outcome of pending and/or future legal and/or regulatory proceedings.

Risks and uncertainties also include the impact of any future events with material adverse impact. The continued impact of COVID-19 could heighten many of the risks and uncertainties noted above. Important information regarding risks and uncertainties is also set forth in Sony’s most recent Form 20-F, which is on file with the U.S. Securities and Exchange Commission.

Sony Group Corp 6-K, filed Feb 2, 2022

About this 6-K