Statements of Account

Annual account documents defined in Japanese Companies Act, for instance balance sheets (B/S), profit and loss statements (P/L), and so forth.

Overview of Statements of Account
According to Article 435 of Companies Act, stock companies are required to create "Statements of Account, business reports, and supplementary schedules for each fiscal year." Although Pre Commercial Code includes "Sales Report" in Statements of Acount, it is not included under the definition of Companies Act.

Companies Act　Article 435

A stock company shall prepare balance sheets at the date of its formation pursuant to the applicable Ordinance of the Ministry of Justice.

2 A stock company shall prepare Statements of Account (balance sheets, profit and loss statements, and other statements prescribed in the applicable Ordinance of the Ministry of Justice as necessary and appropriate in order to indicate the status of the assets and profits and losses of a stock company) and business reports for each fiscal year and supplementary schedules thereof pursuant to the applicable Ordinance of the Ministry of Justice.

3 Statements of Account, business reports and supplementary schedules may be prepared as electromagnetic records.

4 A stock company shall retain its Statements of Account and supplementary schedules for ten years from the time of creation.

As defined in "Company Accounting Regulations" in Ordinance of the Ministry of Justice, Statements of Account include the following. (Statements for consolidated accounting are defined separately.) It is mandatory to build a system to make these statements without any false entries.


 * Statements of Account
 * Balance sheets
 * Profit and loss statements
 * Statement of changes in net assets
 * Notes to specific items
 * Supplementary Schedules
 * Schedule of tangible fixed assets and intangible fixed assets
 * Schedule of allowance
 * Schedule of selling expense and general administrative expense
 * Items omitted owing to Section 1 in Article 140

Company Accounting Regulations(Ordinance of the Ministry of Justice on 2/7/2006) Article 91

Statements defined in Article 435 Section 2 are statements of changes in net assets and notes to specific items prescribed in this section.

2 The period to be included in Statements of Account and supplementary schedules starts on the next day of the last day of the previous fiscal year (or the date of the formation in case there is no previous fiscal year) and ends on the last day of the current fiscal year. This period can not exceed 1 year (1.5 years, in case of the first year after the change of the last date of fiscal year).

3 Statements of Account and supplementary schedules for each fiscal year must be created based on accounting books for the corresponding fiscal year.

Company Accounting Regulations Article 141

Annotation for each stock must include the following amounts.
 * 1) Total assets per stock
 * 2) Net profit or net loss for the corresponding period per stock

Company Accounting Regulations　Article 145

Supplementary schedules for Statements of Account of each fiscal year must include the following items (or the first 3 items in case of privately-held companies) and important issues that supplement the contents of balance sheets, profit and loss statements, statement of changes in net assets, and notes to specific items.


 * 1) Schedule of tangible fixed assets and intangible fixed assets
 * 2) Schedule of allowance
 * 3) Schedule of selling expense and general administrative expense
 * 4) Items omitted owing to Section 1 in Article 140

Calculation-Related Statements
Calculation-Related Statements, including Statements of Account, are defined in Company Accounting Regulations and consist of the following.


 * Balance sheet at the date of the formation
 * Statements of Account and supplementary schedules for the corresponding fiscal year
 * Temporary Statements of Account
 * Consolidated Statements of Account

Statement of Account and Internal Control
Companies Act and Financial Products Exchange Law (for listed companies) prescribe prevention of falsifying information and tampering on Statements of Account. (In Financial Products Exchange Law, Statements of Account is called "Financial Statements.")

Companies Act　Article 362　Section 4

4 Board of directors may not delegate the decision on the execution of important operations such as the following matters to directors:


 * 1) Disposal of and acceptance of assignment of important assets
 * 2) Borrowing in a significant amount
 * 3) Election and dismissal of a important employee, such as managers
 * 4) Establishment, changes or abolition of important structures, such as branch offices
 * 5) Matters prescribed by the applicable Ordinance of the Ministry of Justice as important matters regarding the solicitation of people who subscribe for Bonds including the matters listed in Section 1 of Article 676
 * 6) Development of systems necessary to ensure that the execution of duties by directors complies with laws and regulations and the articles of incorporation, and other systems prescribed by the applicable Ordinance of the Ministry of Justice as systems necessary to ensure the properness of operations of a stock company
 * 7) Exemption from liability under Section 1 of Article 423 pursuant to provisions of the articles of incorporation under the provisions of Section 2 of Article 426.

Companies Act Article 416

The board of directors of a Company with Committees shall perform the following duties regardless of the provisions of Article 362

1 Decision on the following issues and the execution of other operations of the Company with Committees


 * Basic management policy
 * Matters prescribed by the applicable Ordinance of the Ministry of Justice as those necessary for the execution of the duties of the audit committee
 * Matters regarding the interrelationship between executive officers including the division of duties between executive officers and hierarchy of commands of executive officers, in case there are two or more executive officers
 * Directors to receive requests for the convocation of board of directors meeting pursuant to the provisions of Section 2 of the following article
 * Development of systems necessary to ensure that the execution of duties by executive officers complies with laws and regulations and the articles of incorporation, and other systems prescribed by the applicable Ordinance of the Ministry of Justice as systems necessary to ensure the properness of operations of a stock company

2 Supervision of the execution of duties by executive officers etc.

Financial Products Exchange Law（Amended on 6/13/2008）Article 24

Among companies that are required to submit securities reports, companies that are issuers of securities prescribed in Section 1 in Article 24 or other companies which is prescribed in ordinances must submit, to Prime Minister, reports of the evaluation of the system to ensure the accuracy of statements used for financial calculations and other information regarding the corporate group and the concerned company based on the criteria prescribed in Cabinet Office Ordinance along with the securities report.

Related Articles

 * SOX Act
 * J-SOX
 * Internal Control
 * Operating Reports
 * XBRL
 * Business Report