Risk of Unprofitable System Development
First written in FY2016. 12 of 30 entries say "Mitigated", first in FY2020-Q1. Latest entry: 2026-07-29.
Mitsubishi Research Institute moved to the "Worse" side of this theme in 2018, 4 years before the typical company in this theme (2022).
The whole theme swung hardest in 2017: 9 of 31 companies on the "Worse" side.
6 other companies' latest entry also says "Worsened".
- FY2026-H1MaterialisedAnnual report
「Meanwhile, new issues arose during the interim consolidated accounting period in a systems development project, and we recorded an order-loss provision required to address them.」
New issues actually arose in a system development project, and a provision for contract losses was recognized. The provision balance increased from ¥90 million at the end of the previous fiscal year to ¥807 million at the end of the interim period of the current fiscal year. - FY2025-H1WorsenedAnnual report
「Provision for contract losses 132 481」
The provision for contract losses related to the risk of system development projects and similar work becoming unprofitable increased from ¥132 million at the end of the previous fiscal year to ¥481 million at the end of the interim period of the current fiscal year. The business performance discussion also explicitly cites additional cost increases associated with unprofitable projects. - FY2024MitigatedAnnual report
「The provision for contract losses decreased from ¥759 million at the end of the previous fiscal year to ¥132 million at the end of the current fiscal year.」
The provision for contract losses related to the risk of system development projects and similar work becoming unprofitable decreased from ¥759 million to ¥132 million, reducing the provision balance. - FY2024-Q2MitigatedAnnual report
「Provision for contract losses 759 99」
The provision for contract losses related to the risk of system development projects and similar work becoming unprofitable decreased from ¥759 million at the end of the previous fiscal year to ¥99 million at the end of the second quarter. On a cash flow basis as well, the change in the provision for contract losses represented a ¥660 million decrease, indicating a substantial reduction in the provision balance. - FY2023WorsenedAnnual report
「For items where future losses are expected at the end of the current fiscal year and the amount of such losses can be reasonably estimated, we recognize a provision for contract losses against the estimated losses from the following fiscal year onward.」
The provision for contract losses increased from ¥85 million in the previous fiscal year to ¥759 million, indicating broader recognition of future losses related to the risk of system development projects and similar work becoming unprofitable. - FY2023-Q3MitigatedAnnual report
「Provision for contract losses 85 65」
The provision for contract losses decreased from ¥85 million at the end of the previous fiscal year to ¥65 million at the end of the third quarter of the current fiscal year, reducing the provision balance associated with projects becoming unprofitable. - FY2023-Q1MitigatedAnnual report
「During the consolidated fiscal year, we actively made upfront investments in human resources for future growth, which increased costs. However, profit improved as a result of eliminating unprofitable projects in the same period of the previous year, and ordinary profit was ¥938 million, broadly in line with the previous year, up 4.4% year on year.」
The disclosure states that the resolution of unprofitable projects in the same period of the previous year contributed to improved profit, indicating that the response to and impact of unprofitable project risk have been partly reduced. - FY2022-Q3MitigatedAnnual report
「Provision for contract losses 917 105」
The provision for contract losses related to the risk of unprofitable large-scale system development projects and similar work decreased from ¥917 million at the end of the previous fiscal year to ¥105 million at the end of the third quarter. - FY2022-Q2MitigatedAnnual report
「Provision for contract losses 917 737」
The provision for contract losses related to the risk of unprofitable large-scale system development and other projects decreased from ¥917 million at the end of the previous consolidated fiscal year to ¥737 million at the end of the second quarter of the current fiscal year. - FY2022-Q1MaterialisedAnnual report
「Excluding this impact, revenue increased. Ordinary profit declined due to the impact of unprofitable projects in think tank and consulting services, while quarterly net income attributable to owners of the parent increased due to gains on the sale of policy-held shares and other assets.」
Unprofitable projects in think tank and consulting services are reflected as an actual factor behind the decline in ordinary profit. The balance of the provision for contract losses was reported at ¥861 million at the end of the quarter. - FY2021-Q3WorsenedAnnual report
「Provision for contract losses 124 427」
The balance of the provision for contract losses increased from ¥124 million at the end of the previous consolidated fiscal year to ¥427 million at the end of the third quarter of the current fiscal year, indicating an increase in losses recognized in connection with the risk of unprofitable system development. - FY2021-Q2MitigatedAnnual report
「Provision for contract losses 124 56」
The provision for contract losses related to the large-scale system development project decreased from ¥124 million at the end of the previous consolidated fiscal year to ¥56 million at the end of the second quarter of the current fiscal year. - FY2021-Q1MitigatedAnnual report
「Provision for contract losses 124 90」
The provision for contract losses related to the large-scale system development project decreased from ¥124 million at the end of the previous consolidated fiscal year to ¥90 million at the end of the first quarter of the current fiscal year. - FY2020MitigatedAnnual report
「For this development project, the customer indicated its intention to discontinue development of the main portion, and an agreement to terminate that portion was executed in January 2019. While discussing with the customer the measures required following the termination agreement and a review of the contract for the remaining portions, the Company proceeded with the response work in stages. The response work was completed during the current consolidated fiscal year, and the customer accepted it.」
The response work for the quality issues in the large-scale system development project was completed and accepted by the customer. The provision for contract losses also decreased from ¥1,188 million to ¥124 million after reversals. - FY2020-Q3MitigatedAnnual report
「During the third-quarter cumulative period of the current consolidated fiscal year, revenue and cost of sales were recognized after the customer accepted part of this development project, and the corresponding portion of the ¥1,188 million provision for contract losses recognized at the end of the previous consolidated fiscal year was reversed. Discussions with the customer regarding the future execution schedule and work details are continuing. At the end of the third quarter of the current consolidated fiscal year, based on the status of discussions with the customer, the Company estimated response costs and other expenses and recognized the expected future loss of ¥583 million as a provision for contract losses.」
Customer acceptance and revenue recognition progressed for part of the large-scale system development project, reducing the expected future loss from ¥614 million in the previous quarter to ¥583 million. Meanwhile, discussions with the customer concerning the execution schedule and work details are continuing. - FY2020-Q2MitigatedAnnual report
「During the second-quarter cumulative period of the current consolidated fiscal year, revenue and cost of sales were recognized after the customer accepted part of this development project, and the corresponding portion of the ¥1,188 million provision for contract losses recognized at the end of the previous consolidated fiscal year was reversed. Discussions with the customer regarding the future execution schedule and work details are continuing. At the end of the second quarter of the current consolidated fiscal year, based on the status of discussions with the customer, the Company estimated response costs and other expenses and recognized the expected future loss of ¥614 million as a provision for contract losses.」
Customer acceptance and revenue recognition progressed for part of the large-scale system development project, reducing the expected future loss from ¥669 million in the first quarter to ¥614 million. Meanwhile, discussions with the customer concerning the execution schedule and work details are continuing. - FY2020-Q1MitigatedAnnual report
「During the first-quarter cumulative period of the current consolidated fiscal year, revenue and cost of sales were recognized after the customer accepted part of this development project, and the corresponding portion of the ¥1,188 million provision for contract losses recognized at the end of the previous consolidated fiscal year was reversed. Discussions with the customer regarding the future execution schedule and work details are continuing. At the end of the first quarter of the current consolidated fiscal year, based on the status of discussions with the customer, the Company estimated response costs and other expenses and recognized the expected future loss of ¥669 million as a provision for contract losses.」
For the large-scale system development project, the provision for contract losses decreased from ¥1,188 million to ¥669 million following customer acceptance and the recognition of revenue for part of the project. Meanwhile, discussions with the customer concerning the execution schedule and work details are continuing, and the disclosure does not state that the risk has been resolved. - FY2019MaterialisedAnnual report
「At the end of the previous consolidated fiscal year, a provision for contract losses of ¥1,680 million was recognized for a large-scale system development project undertaken by a consolidated subsidiary of the Company, following the occurrence of defects during the testing phase that required additional modification work and other measures to ensure quality. At the end of the current consolidated fiscal year, the expected future loss of ¥1,188 million was recognized as a provision for contract losses. The impact on profit or loss for the current consolidated fiscal year was ¥735 million in cost of sales (provision for contract losses).」
Quality issues in the large-scale system development project and discussions with the customer concerning termination and contract review continued, with an expected future loss of ¥1,188 million and an impact of ¥735 million on profit or loss for the current fiscal year recognized. - FY2019-Q3WorsenedAnnual report
「At the end of the third quarter of the current consolidated fiscal year, based on the status of discussions with the customers, the Company estimated response costs and other expenses associated with the termination agreement and contract review, and recognized the expected future loss of ¥1,361 million as a provision for contract losses. In addition, inventories related to contracts expected to incur losses and the provision for contract losses are presented on a gross basis without offsetting them. Inventories related to this project amounted to ¥546 million at the end of the third quarter of the current consolidated fiscal year. The impact on profit or loss for the third-quarter cumulative period was ¥908 million in cost of sales (provision for contract losses).」
Discussions with the customer concerning the termination agreement and contract review for the large-scale system development project continued. The expected future loss increased from ¥1,164 million in the second quarter to ¥1,361 million, and the cumulative-period profit or loss impact increased from ¥711 million to ¥908 million. - FY2019-Q2MaterialisedAnnual report
「At the end of the previous consolidated fiscal year, a provision for contract losses of ¥1,680 million was recognized for a large-scale system development project undertaken by a consolidated subsidiary of the Company, following the occurrence of defects during the testing phase that required additional modification work and other measures to ensure quality. For this project, the customer indicated its intention to discontinue development of the main portion. An agreement to terminate that portion was executed in January 2019, and discussions are being held with the customer regarding the measures required following the termination agreement and a review of the contract for the remaining portions. At the end of the second quarter of the current consolidated fiscal year, based on the status of discussions with the customer, the Company estimated response costs and other expenses associated with the termination agreement and contract review, and recognized the expected future loss of ¥1,164 million as a provision for contract losses. In addition, inventories related to contracts expected to incur losses and the provision for contract losses are presented on a gross basis without offsetting them. Inventories related to this project amounted to ¥186 million at the end of the second quarter of the current consolidated fiscal year. The impact on profit or loss for the second-quarter cumulative period was ¥711 million in cost of sales (provision for contract losses).」
Defects in the large-scale system development project, the customer’s discontinuation of development of the main portion, and discussions concerning the termination agreement and contract review continued, with an expected future loss of ¥1,164 million and a cumulative-period profit or loss impact of ¥711 million recognized. - FY2019-Q1MaterialisedAnnual report
「At the end of the previous consolidated fiscal year, a provision for contract losses of ¥1,680 million was recognized for a large-scale system development project undertaken by a consolidated subsidiary of the Company, following the occurrence of defects during the testing phase that required additional modification work and other measures to ensure quality. For this project, the customer indicated its intention to discontinue development of the main portion. An agreement to terminate that portion was executed in January 2019, and discussions are being held with the customer regarding the measures required following the termination agreement and a review of the contract for the remaining portions. At the end of the first quarter of the current consolidated fiscal year, based on the status of discussions with the customer, the Company estimated response costs and other expenses associated with the termination agreement and contract review, and recognized the expected future loss of ¥1,236 million as a provision for contract losses. The impact on profit or loss for the first-quarter cumulative period was ¥812 million in cost of sales (provision for contract losses).」
Following defects during the testing phase of the large-scale system development project, the customer indicated its intention to discontinue development of the main portion, an agreement to terminate it was executed, the contract was reviewed, and an additional loss of ¥812 million was recognized. - FY2018-Q3MaterialisedAnnual report
「Meanwhile, ordinary profit was ¥1,924 million, down 24.9% year on year, due to upfront expenditures for developing new businesses and the recognition of a provision for contract losses.」
A provision for contract losses was recognized in IT services, and ordinary profit declined 24.9% year on year. The existing risk of unprofitable system development and other projects is reflected in the actual recognition of a loss provision. - FY2018-Q1RestatedAnnual report
「During the three-month period ended [the current first quarter], there were no newly arising business or other risks, nor any material changes to the business and other risks described in the Annual Securities Report for the prior fiscal year.」
The disclosure states that no new risks have arisen and that there have been no material changes to existing business and other risks, including the risk of system development becoming unprofitable. - FY2017RestatedAnnual report
「The Group’s business is conducted primarily on a project basis under contract agreements. However, even for projects expected to be profitable when orders are received, defects after delivery, customer change requests during execution or additional specifications may increase labor hours and make it impossible to maintain profitability.」
The risk of increased labor hours and deteriorating profitability due to defects, customer change requests and additional specifications has been restated. - FY2017-Q3RestatedAnnual report
「During the nine-month period ended [the current third quarter], there were no newly arising business or other risks, nor any material changes to the business and other risks described in the Annual Securities Report for the prior fiscal year.」
The comprehensive risk disclosure concerning the risk of system development becoming unprofitable continues to state that there have been no material changes. - FY2017-Q2RestatedAnnual report
「During the six-month period ended [the current second quarter], there were no newly arising business or other risks, nor any material changes to the business and other risks described in the Annual Securities Report for the prior fiscal year.」
The comprehensive risk disclosure concerning the risk of system development becoming unprofitable continues to state that there have been no material changes. - FY2017-Q1RestatedAnnual report
「During the three-month period ended [the current first quarter], there were no newly arising business or other risks, nor any material changes to the business and other risks described in the Annual Securities Report for the prior fiscal year.」
Although the individual risks have not been restated, it is expressly stated that no new risks have arisen and that there have been no material changes to the risks described in the previous fiscal year. - FY2016First statedAnnual report
「If defects arise after delivery, customers request changes to their systems during development, or additional specifications are required, increased labor hours may make it impossible to maintain profitability.」
Increased labor hours and deteriorating profitability resulting from defects, customer change requests and additional specifications are identified as system development risks.