Japan to streamline quarterly disclosures
The Japanese government has announced plans to scrap quarterly securities reporting, in an attempt to lighten burdens on companies.
Currently, listed companies are required to make quarterly financial disclosures both to the Financial Services Agency (FSA) and to the relevant stock exchange. These have a certain amount of overlapping content, and some in the business community have complained about the need to prepare two sets of reports.
Japan therefore intends to abolish mandatory quarterly securities reporting. The government had considered eliminating quarterly disclosures altogether, seeking to reduce the market’s focus on short-term profits and nurture a longer-term mindset, but the concern was raised that this would be perceived by investors as a decline in transparency.
A detailed proposal is now to be compiled, and is likely to include a compensatory expansion in the scope of stock-exchange disclosures. Providing materially incorrect information in a report to the FSA can be a criminal offence, whereas this may not be the case for earnings statements to stock exchanges where timeliness is prioritised. An FSA working group has proposed that earning statements should be released as ‘interim securities reports’ so that criminal penalties would apply. Some members have also suggested requiring audits on stock-exchange reports, which similarly are at present not required but do apply to the regulatory reports.
A number of countries have implemented or proposed reductions in quarterly reporting in recent years. The Japanese proposals are one example of the ongoing debate on the balance between reporting burdens for filers versus transparency and timeliness for stakeholders, and how to efficiently consolidate reporting burdens. Digital reporting has a crucial role to play here, in ensuring that data only needs to be compiled once, and can be repackaged to meet the requirements of different stakeholders.