The identifiable assets acquired, the liabilities and contingent liabilities assumed that meet the recognition principles of IFRS 3 “Business Combinations” are measured at their acquisition-date fair values, except: 

· Deferred tax assets or liabilities, liabilities (or assets, if any) related to employee benefits, and liabilities related to share- based payment transactions are recognised and measured in accordance with IAS 12 “Income Taxes”, IAS 19 “Employee Benefits”, and IFRS 2 “Share-based Payment”, respectively; and 

· Non-current assets and disposal groups classified as held for sale are measured in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”. 

The excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest in the acquiree over the acquisition-date fair value of the identifiable net assets acquired is recorded as goodwill. If the excess is negative, then a gain from a bargain purchase is immediately recognised in profit or loss. 

Acquisition-related costs incurred in connection with busi- ness combinations, such as finder’s fees and advisory fees, are expensed when incurred. 

The Group has adopted the exemption under IFRS 1 and elected not to apply IFRS 3 “Business Combinations” retro- spectively to business combinations that had occurred before 1 April 2012 (the date of transition to IFRS). 

## (3) Foreign currency translation 

## (i) Functional and presentation currency 

The financial statements of an entity of the Group are prepared using the functional currency of the entity. The consolidated financial statements of the Group are presented in Japanese yen, which is the functional currency of the Company. 

## (ii) Transactions in foreign currencies 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or an approximation of the rate. 

At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rates at the closing date and exchange differences arising from translation are recognised in profit or loss. 

## (iii) Foreign operations 

Assets and liabilities of foreign operations are translated into Japanese yen using the exchange rate at the end of fiscal year. Income and expenses are translated into Japanese yen using the average exchange rate for the period. 

Exchange differences arising on translating the financial statements of foreign operations are recognised in other com- prehensive income. On the disposal of the interest in a foreign operation, the cumulative amount of the exchange differences is reclassified to profit or loss. 

## (iv) First-time adoption 

The Group applied the exemption under IFRS 1 and reclassi- fied the cumulative translation differences arising on the trans- lation of foreign operations to retained earnings at the date of transition to IFRS. 

## (4) Sales 

## (i) Sale of goods 

Sales are measured at the fair value of the consideration received or receivable, less discounts, charge-backs and other rebates, excluding sales taxes and value added taxes. Also, the Group recognises the sales amount of transactions in which the Group is acting as an agent on a net basis. 

Revenue from the sale of goods is recognised when all of the following conditions have been satisfied, namely, the sig- nificant risks and rewards of ownership of the goods have been transferred to the buyers, the Group retains neither con- tinuing managerial involvement nor effective control over the goods sold, it is probable that the economic benefits will flow to the Group, and the amount of revenue and costs associ- ated with the transaction can be reliably measured. Therefore, revenue is usually recognised at the time of delivery of goods to customers. Sales discounts, charge-backs and other rebates are recognised as accounts payable, provisions or as deductions from accounts receivable. 

## (ii) Royalty income 

Some of the Group’s revenues are generated from the agree- ments under which third parties have been granted rights to produce or market products or rights to use technologies. Royalty income is recognised on an accrual basis in accor- dance with the substance of the relevant agreement. Revenue associated with milestone agreements is recognised upon achievement of the milestones defined in the respective agree- ments. Upfront payments and licence fees received for agree- ments where the rights or obligations still exist are initially recognised as deferred income and then recognised in income as earned over the period of the development collaboration or the manufacturing obligation. 

## (5) Research and development expenses 

Expenditure on research and development of an internal project is fully expensed as “Research and development expenses” in 

