Correction of prior-year financial statements and the effectiveness of measures to prevent recurrence are the key issues

The company received the independent committee’s investigation report dated 31 July 2026 and corrected its prior-year financial statements based on the findings. The matters covered included certain advertising transactions conducted by the company and its subsidiaries, as well as the capitalization of software assets. Investigation costs and the costs required to correct the prior-year financial statements are scheduled to be recorded as extraordinary losses from the financial results for the third quarter of the fiscal year ending September 2026 onward. At the time, the estimated amount was approximately ¥524 million. The first point to confirm in the next financial results will be the final amount against this estimate and whether the disclosure will break it down into investigation costs, correction costs, and other related costs.

The prior-year corrections may affect multiple financial figures, including revenue recognition, software assets, deferred tax assets, net assets, and balances related to receivables securitization, rather than being limited to a one-off expense. It will be important to determine whether the restated comparative information can be presented by applicable fiscal year and quarter, including the effects on revenue and operating income, opening retained earnings, and net assets. In particular, net assets at the end of the third quarter of the fiscal year ending September 2026 were negative ¥276 million and the equity ratio was negative 3.4%, so the effect of the restated figures on financial covenants and listing-maintenance criteria also needs to be confirmed.

The company has explained that the correction of the prior-year financial statements formally breached representations and warranties concerning the accuracy of the financial statements under its agreements with financial institutions. It has also disclosed breaches of financial covenants under its receivables-securitization agreements, while stating that repayment of the difference from the restated receivables was completed in November 2025 and that the financial institutions consented in December 2025 to matters including the waiver of repurchase rights. The next financial results should specifically confirm whether these consents remain valid and whether there have been any additional repayments, collateral pledges, or amendments to the agreements, as well as the balance of receivables securitization and the company’s response to the financial institutions.

The substance of the recurrence-prevention measures lies not only in verifying accounting treatments, but also in how the company addressed performance pressure, the concentration of authority in top management, information sharing with outside officers, and deficiencies in the operation of internal controls. If the next financial results do not disclose the monitoring frequency of the internal audit function and the board of directors and board of company auditors, accounting-approval procedures, supporting-document controls for advertising transactions and software development costs, and the substance of discussions with the audit firm, it will be insufficient to regard the recovery in post-correction earnings as sustainable.