Submission of an Improvement Status Report describing the implementation and operating status of the improvement measures
KASAI KOGYO CO.,LTD. and its consolidated subsidiary KASAI MEXICANA S.A. DE C.V. (KMEX)
KMEX's accounting, SCM, procurement and IT departments; the accounts payable and value-added tax asset accounts; the new system; and the business processes from ordering through payment
Inadequate governance at KMEX; insufficient preparation for the introduction of the new system; insufficient human controls for determining the accounts payable balance and insufficient verification of figures provided by external professionals; insufficient awareness of the need to comply with standard business processes from ordering through payment; a lack of concern about or resistance to the routine deletion of received data on a quarterly basis; and inadequate frameworks at KMEX and the company for accounting, internal auditing, subsidiary management, training, and the preparation and maintenance of manuals.
Company response
Administrative deletion of received data. This has not been carried out since January 2025.
The investigation involved the company's and KMEX's accounting and information systems departments, as well as external accounting professionals, an external systems vendor, a tax adviser, and Deloitte Mexico, the local accounting auditor. The establishment of a third-party committee is Not disclosed.
Strengthen KMEX's governance; develop the necessary reporting functions for the new system; establish controls to determine the accounts payable balance; review the business processes from ordering through payment and rebuild processes that operate smoothly; discontinue the administrative deletion of received data; strengthen KMEX's accounting department; inspect accounting workflows and prepare and maintain manuals; provide training; strengthen governance by head office; strengthen the subsidiary management and support frameworks; strengthen staffing in the company's accounting department; prepare and maintain manuals and related materials; strengthen the internal audit framework; reiterate the escalation rules; provide support from the company when systems are introduced; implement measures addressing why this matter was not detected during the previous 2 corrections to the financial statements; and implement measures addressing the causes of the delay in filing the securities report.
The representative director and president of KASAI KOGYO CO.,LTD. had director compensation reduced by 30%, while the vice president and executive senior managing director each had director compensation reduced by 20%, for the period from July 2025 through October 2025. The CEO and COO of KMEX had total annual compensation reduced by 5%, and the head of accounting had total annual compensation reduced by 3%. Although pursuing legal liability against former officers and employees is considered difficult, the company is pursuing their moral responsibility.
Prior-period consolidated financial results were restated by period and line item. Figures are in millions of yen. For example, in the third quarter of the 93rd fiscal year, the fiscal year ended March 2024, ordinary income was negative ¥1,254 million and net assets were negative ¥2,223 million. For the full 93rd fiscal year, ordinary income was negative ¥1,348 million, net income attributable to owners of the parent was negative ¥1,246 million, and net assets were negative ¥2,191 million. The classification of extraordinary losses and other items is Not disclosed.
Prior-period financial results and other matters from the first quarter of the 92nd fiscal year, the fiscal year ended March 2023, through the second quarter of the 94th fiscal year, the fiscal year ended March 2025
Related procedures
Submission of an Improvement Status Report pursuant to Article 505, Paragraph 1 of the Listing Regulations. The company was previously designated as a security under supervision, and that designation was subsequently lifted.
Tokyo Stock Exchange, Inc. Securities reports are filed with the Kanto Local Finance Bureau.
Some procurement and IT measures are scheduled to begin operating in June 2026, permanent measures are scheduled to be completed by the end of August 2026, and new methods for receiving invoices and other processes are scheduled to begin operating in September 2026. Over the medium to long term, the company also plans to formulate a migration plan for the next-generation system.
| Item | Details |
|---|---|
| Event name | Submission of an Improvement Status Report describing the implementation and operating status of the improvement measures |
| Date of occurrence | Multiple dates. In September 2024, a discrepancy in the value-added tax asset account was identified, and in October 2024, a discrepancy in the accounts payable balance as of the end of September 2024 was identified. The Improvement Status Report was submitted on 15 May 2026. |
| Date recognized / date notice received | The discrepancy in the value-added tax asset account was identified in September 2024. On 17 October 2024, KMEX began investigating the discrepancy in the accounts payable balance and reported it to the company on 11 December 2024. |
| Subject Entity | KASAI KOGYO CO.,LTD. and its consolidated subsidiary KASAI MEXICANA S.A. DE C.V. (KMEX) |
| Target Locations / Products | KMEX's accounting, SCM, procurement and IT departments; the accounts payable and value-added tax asset accounts; the new system; and the business processes from ordering through payment |
| Cause | Inadequate governance at KMEX; insufficient preparation for the introduction of the new system; insufficient human controls for determining the accounts payable balance and insufficient verification of figures provided by external professionals; insufficient awareness of the need to comply with standard business processes from ordering through payment; a lack of concern about or resistance to the routine deletion of received data on a quarterly basis; and inadequate frameworks at KMEX and the company for accounting, internal auditing, subsidiary management, training, and the preparation and maintenance of manuals. |
| Amount of Impact on Business Performance | Prior-period consolidated financial results were restated by period and line item. Figures are in millions of yen. For example, in the third quarter of the 93rd fiscal year, the fiscal year ended March 2024, ordinary income was negative ¥1,254 million and net assets were negative ¥2,223 million. For the full 93rd fiscal year, ordinary income was negative ¥1,348 million, net income attributable to owners of the parent was negative ¥1,246 million, and net assets were negative ¥2,191 million. The classification of extraordinary losses and other items is Not disclosed. |
| Accounting period in which recognized | Prior-period financial results and other matters from the first quarter of the 92nd fiscal year, the fiscal year ended March 2023, through the second quarter of the 94th fiscal year, the fiscal year ended March 2025 |
| Type of litigation or proceeding | Submission of an Improvement Status Report pursuant to Article 505, Paragraph 1 of the Listing Regulations. The company was previously designated as a security under supervision, and that designation was subsequently lifted. |
| Court or authority | Tokyo Stock Exchange, Inc. Securities reports are filed with the Kanto Local Finance Bureau. |
| Date of filing / date of action | The company was designated as a security under supervision effective 25 September 2025, and the designation was lifted effective 9 October 2025. The Improvement Status Report was submitted on 15 May 2026. |
| Suspended operations | Administrative deletion of received data. This has not been carried out since January 2025. |
| Investigation structure | The investigation involved the company's and KMEX's accounting and information systems departments, as well as external accounting professionals, an external systems vendor, a tax adviser, and Deloitte Mexico, the local accounting auditor. The establishment of a third-party committee is Not disclosed. |
| Measures to prevent recurrence | Strengthen KMEX's governance; develop the necessary reporting functions for the new system; establish controls to determine the accounts payable balance; review the business processes from ordering through payment and rebuild processes that operate smoothly; discontinue the administrative deletion of received data; strengthen KMEX's accounting department; inspect accounting workflows and prepare and maintain manuals; provide training; strengthen governance by head office; strengthen the subsidiary management and support frameworks; strengthen staffing in the company's accounting department; prepare and maintain manuals and related materials; strengthen the internal audit framework; reiterate the escalation rules; provide support from the company when systems are introduced; implement measures addressing why this matter was not detected during the previous 2 corrections to the financial statements; and implement measures addressing the causes of the delay in filing the securities report. |
| Directors' and officers' liability | The representative director and president of KASAI KOGYO CO.,LTD. had director compensation reduced by 30%, while the vice president and executive senior managing director each had director compensation reduced by 20%, for the period from July 2025 through October 2025. The CEO and COO of KMEX had total annual compensation reduced by 5%, and the head of accounting had total annual compensation reduced by 3%. Although pursuing legal liability against former officers and employees is considered difficult, the company is pursuing their moral responsibility. |
| Outlook | Some procurement and IT measures are scheduled to begin operating in June 2026, permanent measures are scheduled to be completed by the end of August 2026, and new methods for receiving invoices and other processes are scheduled to begin operating in September 2026. Over the medium to long term, the company also plans to formulate a migration plan for the next-generation system. |
Items this document does not state (9)
These are items the company does not state in this document. We do not leave them blank, nor fill them in from other sources or by inference.
The reasons the company gives
The company's own explanation, not something inferred from the numbers.To report, pursuant to Article 505, Paragraph 1 of the Listing Regulations, on the implementation and operating status of the improvement measures described in the Improvement Report submitted on 11 November 2025. The background includes errors in prior-period accounting at KMEX, delays in announcing financial results and filing securities reports, and the designation of the company as a security under supervision.