Securities Reports and Earnings Reports

There are various sources of information for investors to understand a company's situation.
Among them, annual/quarterly securities reports and Earnings Reports are reliable sources of information, because they are materials that listed companies are required to submit under laws and regulations of stock exchanges.
The purpose of this page is to summarize the background of these reports.

What are Securities Reports?

Annual securities report and quarterly securities report are corporate information disclosure materials that describe the overview of the Company, overview of Business, financial Information, etc.
A report that a company discloses its corporate information every business year is called an annual securities report, and a report that a company discloses every quarter is called a quarterly securities report.

Listed companies are obliged to submit securities reports to the Prime Minister each business year pursuant to Article 24, Paragraph (1) of the Financial Instruments and Exchange Act, and quarterly pursuant to Article 24-4-7, Paragraph (1). ^{ref 1}
A submission form is also specified.
For example, according to Article 15 of the Cabinet Office Order on Disclosure of Corporate Affairs, domestic companies listed in Japan are obliged to prepare annual securities reports based on Form No. 3 of the same law. ^{ref 2}

Because of its format, certain information appears in the same place on any company's annual/quarterly report. ^{ref 3}

Unfortunately, there are very few companies in Japan that issue securities reports in English.
However, since similar content is described in the same place, you may be able to read the Japanese version if you get used to it.

Contents of Annual/Quarterly Securities Reports

The Financial Instruments and Exchange Act is a law aimed at contributing to the sound development of the national economy and the protection of investors.
For this purpose, the Cabinet Office Order on Disclosure of Corporate Affairs stipulates matters that should be included in annual/quarterly securities reports.

The specific contents of the annual/quarterly securities reports will be summarized on a separate page.
This section provides an overview of annual and quarterly securities reports, starting with the composition of each report.

The Annual Securities Report and Quarterly Securities Report are structured as shown in Table 1 respectively.
Items that are common to both reports are items of high importance.
The Annual Securities Report submitted once a year consists of more items.

Even if the item names are the same, the content of the items is richer in the securities report.
Therefore, annual securities reports contain significantly more information than quarterly securities reports.

Both securities reports are occupied by the [Financial Information] for the most part.
The financial statements included in the [Financial Information] are tables that present the results of the business for the applicable quarterly or annual period.
Financial statements are important primary information for management to operate a company and for investors to invest in a company.

As mentioned at the beginning, listed companies are legally required to submit securities reports and quarterly reports, and there are also penalties for false statements.
Therefore, in terms of reliability and accuracy of information, these reports are important sources of information for investors to make investment decisions.

What are Earnings Reports?

Earnings reports are preliminary reports on financial results that listed companies are obliged to disclose by the stock exchange.
Here, the earnings report will be explained using the Tokyo Stock Exchange as an example

According to Article 404 of the Tokyo Stock Exchange's listing regulations, companies listed on the Tokyo Stock Exchange are obliged to promptly disclose the details of their financial results at the end of the business year or the end of the quarter. ^{ref 4}

On the other hand, the Tokyo Stock Exchange emphasizes the promptness of financial statements, and does not require audits of financial statements. ^{ref 5}
In addition, Article 416 of the TSE listing regulations stipulates that when a change or correction to the disclosed content occurs, the content of the change or correction must be disclosed immediately.
Therefore, earnings reports are often revised after the announcement of financial results.

Due to these circumstances, earnings reports are characterized by being superior to annual/quarterly securities reports in terms of promptness, but being inferior in accuracy.

However, since earnings reports are a preliminary stage to securities reports for companies and serious revisions are rare, most investors have some confidence in the content of earnings reports.
Earnings reports are an important source of information for investors who invest in companies with expectations of business performance, as they contain information on operating results and dividends.

Contents of Annual/Quarterly Earnings Reports

The Japanese version of the earnings reports consists of the first two pages called "summary information" and "attached materials".

There is a reference format for summary information, and earnings reports of companies that adopt the same accounting standards are basically prepared in the same format.
Under Japanese GAAP, the format is divided between consolidation and non-consolidation, but except for some details, the format is roughly the same.
The structure of attachments varies slightly from company to company, but due to the preparation guidelines, all companies' attachments have a similar structure. ^{ref 5}

Table 2 shows the composition of annual/quarterly earnings reports (consolidated) based on Japanese GAAP.

Earnings reports also contain more information for the full year than for the quarter.
As a major difference, cash flow statements are always included in annual and second quarter earnings reports, but not necessarily in first and third quarter earnings reports.
In addition, in (1) Consolidated operating results, return on equity, ordinary profit on total assets, and operating profit on net sales are only provided in the annual earnings report.

Incidentally, the Scheduled date to commence dividend payments is described as "undecided" if it is undecided, and as "-" if no dividend is to be paid.

Earnings reports contain less information and are less accurate than securities reports.
However, it is prompt and contains financial statements as important information.
For this reason, in the stock market where foresight is valued, financial statements often move stock prices more than securities reports.