On January 31 2019, the Cabinet Office Order to
Partially Amend the Cabinet Office Order on Disclosure of
Corporate Affairs was issued by the Financial Services Agency.
It was suggested that the original order be revised based on
the recommendations made in the Financial System Council's
'disclosure working group report' announced in June 2018.
Following is an outline of the revisions to be made:
Enhancement of financial and business information
Fruitful disclosure of business information in the annual
securities report allows investors to make appropriate
investment decisions. Therefore, the following revisions were
made for the purpose of deepening investors' understanding of
companies and improving the quality of corporate disclosures
Companies must describe their management policies and
strategies, including the executives' understanding of market
conditions, competitive advantages, key products and services,
and customer base.
Companies must specifically describe the major risks the
executives recognise as having a substantial impact on
Regarding estimates for certain accounting items and the
assumptions used for such estimates, companies must describe
the executives' understanding in respect of any uncertainties
and the impact of changes on operating results.
Provision of information to promote constructive
Companies must provide a detailed explanation of their
compensation programmes (e.g., indicators of performance-linked
compensation, policy on the ratio of performance-based versus
non-performance-based compensation) and how compensation for
performance is based on such programmes.
Regarding policy-based stockholdings (eg, cross holdings),
companies must describe the methods for verifying the
rationality of the stockholdings.
Efforts to ensure the reliability and timeliness of
Knowledge of the details of accounting audits is important
for investors to allow them to make appropriate decisions. In
order to improve disclosure of accounting audit information,
companies must disclose the activities of the Board of
Corporate Auditors (e.g., frequency of meetings of the Board of
Corporate Auditors, major considerations, and the frequency of
attendance for each auditor), the duration of any audit
conducted by outside audit firms, and so on.
Revisions to the 'Provision of Information to Promote
Constructive Dialogue' must be applied in the annual securities
report, and so on, for the fiscal year ending on or after March
31 2019. Other revisions must be applied in the annual
securities report, and so on, for the fiscal year ending on or
after March 31 2020.