Timely Disclosure and XBRL TSE’s Involvement in and Expectations for XBRL

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Timely Disclosure and XBRLTSEs Involvement in
and Expectations for XBRL
12th XBRL INTERNATIONAL CONFERENCE in TOKYO ,
JAPAN 8 November 2005

• Jun Narimatsu
• Manager of Listing Department (C.P.A.)
• TOKYO STOCK EXCHANGE, INC.

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Todays Contents

• Overview of disclosure system
• Ensuring reliability of disclosed information
• Promotion of development and improvement of
  timely disclosure system
• Introduction of oath and affirmation system
• Publication of Handbook for Timely Disclosure
• Expectations for XBRL in terms of development and
  improvement of timely disclosure system
• Ensuring usefulness of disclosed information
• Promotion of prevalence of XBRL

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Overview of disclosure system

• Statutory disclosure
• based on the Securities and Exchange Law
• Securities report , Semi-annual report ,
  Quarterly report Extraordinary report
• Timely disclosure
• based on the rules of the securities exchange
• Preliminary report of business results
• Semi-annual preliminary report of business
  results
• Quarterly report
• Decisions and event occurrence (promptly)

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Comparison between statutory disclosure and
timely disclosure
Statutory Disclosure
Timely Disclosure
Preliminary report of business results (average
time required about 43.5 days) Semi-annual
preliminary report of business results (average
time required about 43.4 days) Quarterly report
(average time required about 33.9
days) Decisions and event occurrence (promptly)
Securities report (within three months subsequent
to balance sheet date) Semi-annual report (within
three months subsequent to semi-annual balance
sheet date) Quarterly report (under consideration
to make the report statutorily mandatory) Extraord
inary report (without delay)
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Keyword of statutory disclosure and timely
disclosure
Statutory disclosure Timely disclosure
Accuracy ? ?
Promptness ? ?
Flexibility of disclosure ?
Comparability ? ?
Means to ensure accuracy e.g., Criminal penalty, Fine, Civil liability, Audit system under the premise of accuracy of statutory disclosure
Means to ensure accuracy e.g., Criminal penalty, Fine, Civil liability, Audit system requirements for improvement report
Means to ensure accuracy e.g., Criminal penalty, Fine, Civil liability, Audit system delisting where the third improvement report is required within three years
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Present situation of electronic disclosure
Reading rooms at Local Finance Bureaus, etc
Legal disclosure (FSA)
EDINET
Internet
Immediate
FSAs Web site
Electronic Disclosure for Investors' NETwork
investors
Internet , TV , Information terminals, etc.
Listed companies
Media institutions, etc.
Timely disclosure (TSE)
Internet
Immediate
Web Real-time service

TDnet
31 DAYS , Free
Timely Disclosure network
Internet
Immediate
Database Service
5 YEARS , Fee Charge
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Improvement of timely disclosure system

• Changes in circumstances surrounding information
  disclosure
• Frequent occurrences of inappropriate events in
  relation to corporate information disclosure
• Enhanced interest of investors in information
  disclosure
• Introduction of oath and affirmation system
  (January 2005)
• Publication of Guideline for Development and
  Improvement of Timely Disclosure System and
  Points in Preparing Oath (July 2005)
• Research and analysis of each of individual
  listed companies which have a sufficiently
  developed disclosure system taking into account
  the presentation accompanying oath documents
• Summary compilation on the basis of the results
  of the above research and analysis taking into
  account the views and opinions of academics and
  specialists inside and outside the TSE and the
  publication thereof
• - Provision of guidelines when individual listed
  companies develop disclosure systems meeting
  their own conditions

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Overview of oath and affirmation system

• Documents required to be filed an oath signed by
  the representative
• - Accompanying documents stating the state of
  internal system concerning timely disclosure
• Contents of description document stating that
  the company fully acknowledges that timely
  disclosure of corporate information to investors
  is fundamental for a sound securities market and
  that the company is always implementing with
  integrity the timely disclosure to investors by
  improving the internal system described in the
  accompanying documents, so that prompt, accurate
  and fair disclosure of corporate information can
  always be attained from the perspective of
  investors.
• Timing of filing when the representative changes
• Elapse of 5 years from the previous oath
• Affirmation concerning fairness of securities
  report and the like
• Documents required to be filed an affirmation
  signed by the representative (or copy of
  statutory documents voluntarily attached)
• Contents of description documents stating that
  the representative believes that there are no
  false statements contained in securities reports
  and semi-annual reports and the supporting reason
  why the representative believes so
• Timing of filing at the time of filing of the
  securities report and semi-annual report

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Points for improving timely disclosure 1

• Extracts from the Handbook for Development and
  Improvement of Timely Disclosure System and
  Points in Preparing Oath

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Points for improving timely disclosure 2
Contents
Points
Division
Development and improvement of department
responsible for disclosure
Development and improvement of organization
responsible for disclosure
System to fulfill timely disclosure activities
Overall responsiveness to disclosure of the
company as a whole
Education concerning disclosure
Extent to which disclosure system is developed
and improved
Disclosure procedures and disclosure process
Improvement of timely disclosure system
Categories of information subject to disclosure
Thorough dissemination of the established
procedures within the company
Points for timely disclosure procedures
Correlation with other internal procedures to
which the timely disclosure procedures closely
relate
Monitoring by internal audit department
Improving monitoring system covering timely
disclosure system
Monitoring by corporate auditors (corporate
auditors committee)
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Issues to be considered in developing and
improving disclosure system
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Organization to implement timely disclosure
activities 1
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Organization to implement timely disclosure
activities 2
Subject to the disclosure procedures, the work
should be divided into the following processes?
Information collection process? Analysis and
judgment process? Announcement process
Disclosure procedures and disclosure process
Improvement of timely disclosure system
Necessity of establishing respective procedures
by disclosure information category?
Occurrence? Decision? Performance results
Categories of information subject to disclosure
Written procedures are critical for thorough
dissemination and monitoring.
Thorough dissemination of the established
procedures within the company
Goals to be attained in order to meet the
required standards? Information collection
process promptness and extensiveness? Analysis
and judgment process timeliness, compliance,
accuracy and formalness? Announcement process
activeness and fairness
Points for timely disclosure procedures
The objective of IR activities and prevention of
insider trading is primarily different from that
of disclosure, but the objective of disclosure
should be achieved taking into account the
relation with IR activities and prevention of
insider trading.
Correlation with other internal procedures to
which the timely disclosure procedures closely
relate
Monitoring should be effected independent of the
department responsible for disclosure.
Monitoring by internal audit department
Improving monitoring system covering timely
disclosure system
Monitoring should be effected independent of the
department responsible for disclosure and
business execution organs.
Monitoring by corporate auditors (corporate
auditors committee)
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Points for timely disclosure procedures

• Goals to be attained in order to meet the
  required standards

Description
Points
Process
Information to be disclosed in a timely manner
should be collected promptly.
a) Promptness
Information collection process
Information to be disclosed in a timely manner
should be collected extensively.
b) Extensiveness
Disclosure activities should be managed in order
to implement timely disclosure.
c) Timeliness
Analysis and judgment process
Timely disclosure activities should be effected
in compliance with timely disclosure rules,
applicable laws and regulations, etc.
d) Compliance
The accuracy of information to be disclosed in a
timely manner should be ensured.
e) Accuracy
In addition to accuracy and compliance of
information, the company should make a formal
approval or decision on the disclosure after
verifying the adequateness and clarity of the
contents of disclosed information.
f) Formalness
Fairness should be considered in publishing
disclosure materials.
g) Fairness
Announcement process
Disclosure materials should be actively published.
h) Activeness
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Expectations for XBRL in developing and improving
disclosure system

• Expected effects are
• more prompt and efficient preparation of
  disclosure materials
• more prompt and efficient response to revised
  laws and regulations and amendments to accounting
  standards
• more prompt and efficient settlements of
  consolidated accounts and
• more prompt and efficient audits by auditors
• As a result, the following points in the
  disclosure procedures can be fully obtained in a
  compatible manner at a higher level
• promptness and timeliness
• accuracy and formalness

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Future image centering on the TSE

• XBRL technologies will be consecutively utilized
  to receive and deliver timely disclosure
  information.
• XBRL technologies will be consecutively utilized
  to provide timely disclosure information.
• In particular, the taxonomy for statutory
  disclosure operated by the Financial Services
  Agency (FSA) and the taxonomy for timely
  disclosure will be made consistent.

Timely Disclosure ( by XBRL )
Tokyo Stock Exchange
Web Service
Listed companies
Investors
Output by XBRL
Input by XBRL
Media institutions, etc.
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TSEs enlightenment activities on XBRL

• 1.Trial opening of XBRL data (within this fiscal
  year)
• TSE plans to open the XBRL data as a trial,
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  hopefully by the end of this fiscal year.
• Issues incorporated into data issues used in the
  TOPIX core 30
• Information incorporated into data preliminary
  report of business results concerning final
  settlement of accounts (on a consolidated basis)
• Expected time of opening Within fiscal 2005
• 2.Opening of XBRL enlightenment website
• A website for providing information on XBRL was
  set up in November.
• http//www.tse.or.jp/listing/xbrl/

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• TOKYO STOCK EXCHANGE, INC.
• http//www.tse.or.jp