v3.26.1
TAXES
 12 Months Ended
Feb. 28, 2026
Income Tax Disclosure [Abstract]  
TAXES

Note 9 — TAXES

 

The Company generates taxable income primarily in Japan. Income taxes in Japan applicable to the Company are imposed by the national, prefectural, and municipal governments, and in the aggregate resulted in a statutory rate of approximately 30.6% for the fiscal years ended February 29, 2024, February 28, 2025 and February 28, 2026.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, significantly amending U.S. federal tax law, including changes to international tax provisions, expensing of research and experimental expenditures, depreciation, and interest deduction rules. The Company does not expect the OBBBA to have a material impact on its effective tax rate.

 

The components of provision (benefit) for income taxes were as follows:

 

                               
    For the Fiscal Years Ended  
    February 29,
2024		     February 28,
2025		     February 28,
2026		     February 28,
2026		  
    JPY     JPY     JPY     US$  
    (In thousands)  
Current     703,501       953,843       1,030,260       6,602  
Deferred     (163,968 )     (271,623 )     (327,464 )     (2,098 )
Income tax provisions     539,533       682,220       702,796       4,504  

 

A reconciliation of the effective income tax rates reflected in the accompanying consolidated statements of income and comprehensive income and Japanese statutory tax rate for the fiscal years ended February 29, 2024, February 28, 2025 and February 28, 2026 were as follows:

 

                       
    For the Fiscal Years Ended  
    February 29,
2024		     February 28,
2025		     February 28,
2026		  
Japanese statutory tax rate     30.6 %     30.6 %     30.6 %
Non-deductible executive compensation     3.3 %     7.2 %     3.7 %
Changes in valuation allowance     (1.7 )%     (2.7 )%     1.2 %
Tax credits     (4.0 )%     (0.2 )%     (3.1 )%
Tax rate differences by jurisdiction     (0.6 )%     (0.4 )%     (0.3 )%
Other non-deductible expenses     0.2 %     0.0 %     0.2 %
Effect of true-up on NOL     0.0 %     0.0 %     0.0 %
Deferred offering costs     0.0 %     (1.3 )%     (2.2 )%
Others     0.0 %     0.3 %     0.2 %
Effective tax rate     27.8 %     33.5 %     30.3 %

 

The statutory tax rate in effect for the fiscal year in which the temporary differences are expected to reverse are used to calculate the tax effects of temporary differences that are expected to reverse in the future years.

 

The tax effects of temporary differences that give rise to the deferred income tax assets and liabilities as of February 28, 2025 and February 28, 2026 are presented below:

 

                       
    As of
February 28,
2025		     As of
February 28,
2026		     As of
February 28,
2026		  
    JPY     JPY     US$  
    (In thousands)  
Deferred tax assets                        
Net operating loss carry forward     42,664       -       -  
Reserves and accruals     103,206       102,018       654  
Investments     114,471       143,115       917  
Property and equipment     324,129       645,383       4,136  
Leases     1,440,267       1,485,057       9,517  
Contract liabilities     426,987       482,804       3,094  
Others     63,539       40,708       261  
Valuation allowance     (116,210 )     (145,120 )     (931 )
Total deferred tax assets     2,399,053       2,753,965       17,648  
Net off against deferred tax liabilities     (1,711,688 )     (1,725,571 )     (11,058 )
Net deferred tax assets     687,365       1,028,394       6,590  
                         
Deferred tax liabilities                        
Prepayments and other assets     (69,827 )     (77,878 )     (499 )
Deferred costs     (314,337 )     (414,821 )     (2,658 )
Leases     (1,279,764 )     (1,248,060 )     (7,998 )
Others     (47,760 )     (46,325 )     (297 )
Total deferred tax liabilities     (1,711,688 )     (1,787,084 )     (11,452 )
Net off against deferred tax assets     1,711,688       1,725,571       11,058  
Net deferred tax liabilities     -       (61,513 )     (394 )

 

The Company recorded net deferred tax assets of JPY687.4 million and JPY1,028.4 million ($6.6 million) as of February 28, 2025 and February 28, 2026, respectively. In valuing deferred tax assets, the Company uses judgment, considering the relative impact of negative and positive evidence. The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which it can be objectively verified. Based on the weight of evidence, management has provided a valuation allowance on deferred tax assets in the amount of JPY116.2 million and JPY145.1 million ($0.9 million) as of February 28, 2025 and February 28, 2026, respectively, since it was determined that it was more likely than not that deferred tax assets would not be utilized in the foreseeable future. Based on the level of historical taxable income and projections for the future taxable income over the periods in which the deferred tax assets become deductible, management believes all remaining deferred tax assets as of February 28, 2025 and February 28, 2026, were fully realizable.

 

Interest and penalties related to income tax matters are recognized as a component of selling, general, and administrative expenses in the consolidated statements of income and comprehensive income, if applicable. The Company did not have any uncertain tax benefits, interest, or penalties associated with uncertain tax benefits that have been accrued or recognized as of and for the fiscal years ended February 29, 2024, February 28, 2025 and February 28, 2026.

 

Changes to valuation allowance for deferred tax assets were as follows for the fiscal years ended February 29, 2024, February 28, 2025 and February 28, 2026:

 

                               
    For the Fiscal Years Ended  
    February 29,
2024		     February 28,
2025		     February 28,
2026		     February 28,
2026		  
    JPY     JPY     JPY     US$  
    (In thousands)  
Valuation allowance, beginning of year     240,934       213,318       116,210       745  
Additions     5,484       2,047       28,659       184  
Reversals     (33,592 )     (99,120 )     -       -  
Foreign exchange translation adjustments     492       (35 )     251       2  
Valuation allowance, end of year     213,318       116,210       145,120       931  

 

As of February 28, 2026, the Company had no loss carryforwards in Japan.

 

The Company is subject to taxation and files income tax returns in Japan and several foreign jurisdictions. As of February 28, 2026, tax years from February 28, 2022 through February 28, 2026 remained open to examination by the Japanese tax authorities. In foreign jurisdictions, including but not limited to the United States, Thailand, and Germany, tax years generally remain subject to examination for a period of three to five years, depending on local statutory requirements. No material tax examinations are currently ongoing in any jurisdiction.